Euro Traders Facing Major Decision at 1.1303 – 1.1345

The Euro is trading higher on Tuesday, helped by a weaker U.S. Dollar and position-squaring ahead of Thursday’s European Central Bank (ECB) meeting.

The dollar is giving back some of its recent gains on profit-taking and position-squaring ahead of several key U.S. economic reports this week including Tuesday’s ISM Manufacturing PMI and JOLTS Job Openings as well as Friday’s U.S. Non-Farm Payrolls report.

At 11:54 GMT, the EUR/USD is trading 1.1276, up 0.0042 or +0.38%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $104.35, up $0.76 or +0.73%.

Last week, the Euro fell against the U.S. Dollar on expectations of a faster pace of rate hikes by the Federal Reserve. On Monday, the single-currency surged as the greenback weakened after Fed policymakers said they’ll raise interest rates in March, but spoke cautiously about the timing of future rate hikes.

In other news, the European Central Bank meets on Thursday. While no policy change is expected, analysts said the Fed’s looming rate hikes will narrow the ECB’s window for action.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 1.1122 will signal a resumption of the downtrend. A move through 1.1483 will change the main trend to up.

The short-term range is 1.1483 to 1.1122. Its retracement zone at 1.1303 to 1.1345 is the nearest upside target and potential resistance area.

Daily Forecast

The direction of the EUR/USD into the close on Tuesday is likely to be determined by trader reaction to 1.1233.

Bullish Scenario

A sustained move over 1.1233 will indicate the presence of buyers. Taking out the intraday high 1.1279 will indicate the buying is getting stronger. If this continues to generate enough upside momentum then look for the rally to possibly extend into 1.1303 to 1.1345.

Since the main trend is down, sellers are likely to come in on a test of 1.1303 to 1.1345. They are going to try to form a secondary lower top. If successful then look for a 50% to 61.8% retracement of the rally from 1.1122.

Bearish Scenario

A sustained move under 1.1233 will signal the presence of sellers. The next downside target will be 1.1178. Aggressive counter-trend buyers could come in on a test of this level. They will be trying to form a secondary higher bottom. If 1.1178 fails as support then look for the selling to possibly extend into 1.1122.