Euro May Have Enough Downside Momentum to Reach 1.1335

The Euro is trading lower on Tuesday, pressured by a stronger U.S. Dollar and rising U.S. Treasury yields as investors were positioning themselves for higher interest rates in the United States. The rise in U.S. Treasury yields pushed the Euro to a four-day low.

At 12:32 GMT, the EUR/USD is trading 1.1389, down 0.0017 or -0.15%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $106.08, down $0.34 or -0.32%.

The U.S. Federal Reserve meets next week. It is expected to raise rates in March, for the first time since the start of the coronavirus pandemic, and investors are pricing in four rate hikes in 2022.

As investors braced for the possibility of the Fed being more hawkish than expected, U.S. Treasury yields jumped on Tuesday, with two-year yields (which track short-term rate expectations) crossing 1% for the first time since February, 2020.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the formation of the closing price reversal top on January 14.

Taking out 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 1.1272.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is the next downside target. It’s also potential support and a trigger point for an acceleration to the downside.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is the most likely downside target. Since the main trend is up, buyers are likely to show up on the first test of this area.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the rally on Friday at 1.1483.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to the pivot at 1.1377.

Bullish Scenario

A sustained move over 1.1377 will indicate the presence of buyers. If this move creates enough upside momentum then look for a retest of the main retracement zone at 1.1439 to 1.1499 over the near-term.

Bearish Scenario

A sustained move under 1.1377 will indicate the early selling pressure is getting stronger. This could extend the selling into the retracement zone at 1.1335 to 1.1300. Since the main trend is up, buyers could come in on a test of this area so look for a technical bounce. This is the last major support before the multi-year low at 1.1186.