Euro Traders Eyeing 1.1124 for Potential Momentum Shift

The Euro is trading lower against the U.S. Dollar on Wednesday as it heads toward what I think is it’s next major objective, the May 25, 2020 bottom at 1.0871.

The single-currency plunged to its weakest level since May 2020 earlier in the session as investors worried about the impact of an escalating conflict in Ukraine on the region’s economic prospects, while demand for dollars rose as nervous traders looked for safety.

At 13:29 GMT, the EUR/USD is trading 1.1097, down 0.0027 or -0.24%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $103.26, down $0.80 or -0.77%.

Adding to the Euro’s woes was a pullback in bets on a European Central Bank interest rate hike. The news drove German government bond yields sharply lower on Tuesday.

In breaking news, Federal Reserve Jerome Powell said Wednesday he sees interest rate hikes ahead though he noted the “implications for the U.S. economy are highly uncertain” from the Ukraine war. Additionally, Powell called the labor market “very tight” and said inflation has risen well above the Fed’s 2% target.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 1.1059 will signal a resumption of the downtrend. A move through 1.1389 will change the main trend to up.

The minor range is 1.1389 to 1.1059. Its 50% level at 1.1224 is the first resistance level.

The short-term range is 1.1495 to 1.1059. Its 50% level at 1.1277 is controlling the near-term direction of the EUR/USD.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to 1.1124.

Bearish Scenario

A sustained move under 1.1124 will indicate the presence of sellers. Taking out the intraday low at 1.1059 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with 1.0871 the primary downside target.

Bullish Scenario

A sustained move over 1.1124 will signal the presence of buyers. Taking out the intraday high at 1.1136 will indicate the short-covering rally is getting stronger. If this creates enough upside momentum then look for a possible surge into the pair of 50% levels at 1.1224 and 1.1277.

A close over 1.1124 on Wednesday will form a potentially bullish closing price reversal bottom. It confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.