EUR/USD Forex Technical Analysis – Testing Retracement Zone; Strengthens Over 1.0714, Weakens Under 1.0645

James Hyerczyk
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The Euro is down against the U.S. Dollar late Wednesday, but off its lows of the session following the release of the minutes of the Federal Reserve’s May policy meeting at 18:00 GMT.

The single currency is rebounding after the Fed minutes showed its members were unanimous in their sentiment that the U.S. economy was very strong as they grappled with how to rein in inflation without triggering a recession. In my opinion, the minutes didn’t contain any major surprises.

At 19:26 GMT, the EUR/USD is trading 1.0686, down 0.0049 or -0.46%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $98.86, down $0.50 or -0.50%.

The minutes – taken at the Federal Open Market Committee’s May meeting, which culminated in a 50-basis-point hike in the Fed funds rate, the biggest jump in 22 years – showed most of its members judged that further such rate hikes would “likely be appropriate” at its upcoming June and July meetings.

Euro Zone Yields Fall as Lagarde Gains Allies for Gradual Tightening

The EUR/USD was pressured early as Euro Zone government bond yields fell on Wednesday after European Central Bank officials supported President Christine Lagarde’s plan for gradual monetary tightening, while concerns about the economic outlook dampened risk appetite.

Lagarde gained key allies for her plan to raise rates out of negative territory in steady increments this summer, though one of her board members expressed some skepticism at the speed of the change she has signaled.

Daily EUR/USD
Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0749 will signal a resumption of the uptrend. A move through 1.0354 will change the main trend to down.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is the primary upside target and key resistance area.

The short-term range is 1.0936 to 1.0354. The EUR/USD is currently testing its retracement zone at 1.0645 to 1.0714.

The minor range is 1.0354 to 1.0749. Its trailing pivot comes in at 1.0552.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0645 will determine the direction of the EUR/USD into the close on Wednesday.

Bullish Scenario

A sustained move over 1.0645 will indicate the presence of buyers. The first upside target is 1.0714. Additional targets include the minor top at 1.0749 and the main 50% level at 1.0770.

Bearish Scenario

A sustained move under 1.0645 will signal the presence of sellers. This is a potential trigger point for an acceleration into the minor pivot at 1.0552.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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