The Euro hit its lowest level in three weeks on Friday as rapidly rising Treasury yields widened the spread between U.S. Government bonds and German bunds, making the U.S. Dollar a more attractive investment. The catalyst behind the increasing yields was the news that China and the United States had agreed to cancel some tariffs as part of a potential pact to end their trade war.
On Friday, the EUR/USD settled at 1.1020, down 0.0031 or -0.28%.
Earlier in the week, the European Commission (EU) forecast the Euro Zone economy is likely to grow slower than earlier expected this year and next because of global trade conflicts, geopolitical tensions and Brexit. The news put additional pressure on the Euro.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The trend turned down on November 5 when sellers took out the 1.1073 main bottom. A trade through 1.1176 will change the main trend to up. Taking out the main top at 1.1180 will reaffirm the uptrend.
The major resistance is the long-term Fibonacci level at 1.1185. The last three main tops at 1.1164, 1.1176 and 1.1180 have all stopped short of this level. It is controlling the longer-term direction of the EUR/USD.
The main range is 1.1286 to 1.0879. Its retracement zone at 1.1083 to 1.1131 is new resistance.
The short-term range is 1.0879 to 1.1180. Its retracement zone at 1.1030 to 1.0994 is the next downside target. On Friday, the EUR/USD closed inside this zone.
The retracement zone at 1.0994 to 1.1030 is very important to the structure of the daily chart pattern. Trend-trading sellers are going to try to drive the EUR/USD through the bottom of the range at 1.0994. Aggressive counter-trend buyers are going to try to form a secondary higher bottom. If successful, this could start another rally.
Daily Swing Chart Technical Forecast
Based on Friday’s close at 1.1020, the direction of the EUR/USD on Monday is likely to be determined by trader reaction to the short-term 50% level at 1.1030.
A sustained move under 1.1030 will indicate the presence of sellers. This could trigger a break into the short-term Fibonacci level at 1.0994. This is a potential trigger point for an acceleration to the downside with the main bottom at 1.0879 the next likely downside target.
A sustained move over 1.1030 will signal the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the main 50% level at 1.1083. Since the main trend is down, sellers could come in on the first test of this level.
This article was originally posted on FX Empire
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