EURUSD Forecast – ECB Plans to Drain Cash from Financial System

The Euro is trading flat against the U.S. Dollar on Friday after yesterday’s volatile trading session led to a steep loss. On Thursday, the European Central Bank (ECB) eased the pace of its interest rate hikes but stressed significant tightening remained ahead and laid out plans to drain cash from the financial system.

At 14:16 GMT, the EUR/USD is trading 1.0622, down 0.0005 or -0.04%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $98.03, down $0.51 or -0.52%.

“The ECB sent a crystal-clear message over its hawkish intentions. The corrective sell-off looks inadequate so far and likely has much further to run,” Citi analysts said.

Investment bank JPMorgan ramped up its forecasts for how high Euro Zone interest rates will go to 3.25%, from 2.50%.

The Bank of France’s head Francois Villeroy de Galhau added on Friday the battle against inflation wasn’t over, adding though that the ECB doesn’t want to provoke a recession.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, a trade through 1.0593 will shift momentum to the downside.

A trade through the June 9 main top at 1.0774 will reaffirm the uptrend. A move through 1.0443 will change the main trend to down.

The minor range is 1.0443 to 1.0736. The EUR/USD is currently testing its pivot at 1.0590.

The short-term range is 1.0290 to 1.0736. Its pivot at 1.0513 is additional support.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 1.0590 is likely to determine the direction of the EUR/USD on Friday.

Bullish Scenario

A sustained move over 1.0590 will indicate the presence of buyers. The first target is 1.0665, followed by 1.0736.

Bearish Scenario

A sustained move under 1.0590 will signal the presence of sellers. This could trigger a sharp break into the 50% level at 1.0513. This is the last potential support before the 1.0443 main bottom.