Euro Trading on Weakside of 1.1407 – 1.1475 Retracement Zone

The Euro is under pressure on Friday and was set for a weekly decline after European Central Bank President Christine Lagarde warned raising rates now could only hurt the economy.

Earlier in the day, the common currency fell, down from a three-month high touched the previous day, after Lagarde said in an interview that raising rates now would not bring down record Euro Zone inflation but only slow down economic growth.

At 14:44 GMT, the EUR/USD is trading 1.1389, down 0.0040 or -0.35%. The Invesco CurrencyShares Euro Trust ETF (FXE) is trading $105.78, down $0.40 or -0.38%.

In the meantime, the U.S. Dollar continued to remain strong after U.S. inflation surged to a 40-year peak and comments from St. Louis Federal Reserve President James Bullard unleashed a wave of bets on aggressive rate hikes.

Last week, Lagarde sent bond yields and the Euro higher by signaling for the first time that an ECB rate hike this year was a possibility, but she has since tried to temper surging expectations of aggressive ECB action.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower.

A trade through 1.1495 will signal a resumption of the uptrend. A move through 1.1122 will change the main trend to down.

The minor trend is down. It changed to down on Thursday when sellers took out 1.1396. This shifted momentum to the downside.

The EUR/USD is currently trading on the weak side of the short-term retracement zone at 1.1407 to 1.1475, making this area resistance.

The minor range is 1.1122 to 1.1495. Its retracement zone at 1.1308 to 1.1265 is the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Friday is likely to be determined by trader reaction to 1.1407.

Bearish Scenario

A sustained move under 1.1407 will indicate the presence of sellers. Taking out the intraday low at 1.1370 will indicate the selling pressure is getting stronger. This could trigger the start of an acceleration to the downside with 1.1308 to 1.1265 the next likely downside target area.

Bullish Scenario

A sustained move over 1.1407 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into the pivot at 1.1433. Overtaking this level will indicate the buying is getting stronger with the next target zone 1.1475 to 1.1516. Inside this area is a minor top at 1.1495.