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The Euro finished slightly higher against the U.S. Dollar on Friday, but the single-currency remained inside the wide range from June 25 for a third session. This chart pattern tends to indicate investor indecision and impending volatility.
Keep a lid on prices last week were the dovish comments from Federal Reserve Chairman Jerome Powell and St. Louis Federal Reserve President James Bullard. Powell failed to indicate the need for a rate cut at the end of July and Bullard said a 50 basis point rate cut would be excessive. These comments drove up U.S. Treasury yields, making the U.S. Dollar a more attractive asset.
On Friday, the EUR/USD settled at 1.1370, up 0.0001 or +-.01%.
Given the events over the week-end involving the U.S. and China, we could be in for a volatile session on Monday. On Saturday, U.S. President Donald Trump and Chinese President Xi Jinping announced the restart of trade talks between the two economic powerhouses.
If Treasury yields rise sharply on the news then look for the EUR/USD to take a hit. Higher yields will make the U.S. Dollar a more attractive asset. The news could also reduce the need for a Fed rate cut in late July.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside with the formation of the closing price reversal top on June 25 at 1.1413.
A trade through 1.1413 will confirm the chart pattern. This could trigger the start of a 2 to 3 day counter-trend break.
A move through 1.1413 will negate the chart pattern. This will signal a resumption of the uptrend.
The main range is 1.1448 to 1.1107. Its retracement zone at 1.1318 to 1.1278 is new support. Holding above this zone will help maintain the current upside bias. Falling below this zone will shift momentum to the downside.
The short-term range is 1.1107 to 1.1413. Its retracement zone at 1.1260 to 1.1224 is another potential downside target. This is followed by 1.1185 which is long-term Fibonacci support.
Daily Swing Chart Technical Forecast
Based on Friday’s price action and the close at 1.1370, the direction of the EUR/USD on Monday is likely to be determined by trader reaction to the minor pivot at 1.1379.
Bullish Scenario
A sustained move over 1.1379 will indicate the presence of buyers. If this generates enough upside momentum then look for a rally into the closing price reversal top at 1.1413. Taking out this top could drive the EUR/USD into the March 21 top at 1.1448.
Bearish Scenario
A sustained move under 1.1379 will signal the presence of sellers. Taking out 1.1344 will confirm the reversal top. This could drive the EUR/USD into 1.1318. This is a potential trigger point for an acceleration to the downside with the next targets a pair of 50% levels at 1.1278 to 1.1260.