Headline Driven Euro Setting-Up for Heightened Volatility

The Euro is trading nearly flat against the U.S. Dollar on Thursday after clawing back earlier losses. The single currency retreated shortly after the opening after a Russian news report of mortar fire in eastern Ukraine. But Ukraine’s denial and the location of the reported attack within already contested territory calmed things.

At 11:41 GMT, the EUR/USD is at 1.1365, down 0.0009 or -0.08%. This is up from an earlier low of 1.1324. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.71, up $0.22 or +0.21%.

According to reports, Russia-backed rebels accused Ukrainian forces of shelling their territory in violation of agreements aimed at ending conflict in the contested Donbass area, the RIA news agency said, a report later denied by Ukraine.

In other news, the International Monetary Fund (IMF) said on Thursday, the European Central Bank (ECB) has been right to maintain its easy money policy as inflation is set to fall after “transient boosts” from supply snags that may extend into next year.

Backing from her former employer was likely to bring some relief to ECB President Christine Lagarde as she struggles to persuade investors that she is not about to jack up interest rates in the face of record inflation.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1280 will signal a resumption of the downtrend. A move through 1.1495 will change the main trend to up.

The minor trend is also down. A trade through 1.1395 will change the minor trend to up. This will shift momentum to the upside.

The EUR/USD is currently trapped between a pair of minor pivots at 1.1338 and 1.1387.

On the upside, the key retracement zone resistance is 1.1407 to 1.1474.

On the downside, the support zone is 1.1308 to 1.1265. On Monday, this zone stopped the selling at 1.1280 on Monday.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Thursday is likely to be determined by trader reaction to 1.1338.

Bullish Scenario

Overtaking 1.1338 will signal the presence of buyers. Taking out 1.1395 will indicate the buying is getting stronger. A move through 1.1407 could trigger an acceleration to the upside with 1.1474 the next target. Taking out 1.1495 will change the main trend to up.

Bearish Scenario

A sustained move under 1.1338 will indicate the presence of sellers. The first downside target is the support zone at 1.1308 to 1.1265. The latter is a potential trigger point for an acceleration to the downside.

Side Notes

The Ukraine-Russia crisis is helping to hold the EUR/USD in a range. The longer it moves sideways, the bigger the breakout so you just have to be patient since were in a news driven market.