The Euro is trading higher on Friday while clawing back more than half of yesterday’s loss. The current price puts it in a position to post its biggest weekly gain in over four months. The rally is being fueled by a weaker U.S. Dollar, which is tumbling due to expectations that the U.S. Federal Reserve will pause its tightening cycle. This notion is being supported by last week’s comments from Fed Chair Jerome Powell and this week’s minutes from the December Fed policy meeting, both of which were dovish.
At 1211 GMT, the EUR/USD is trading 1.1535, up 0.0034 or +0.20%.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The trend turned up earlier in the week when buyers took out the swing top at 1.1497. Momentum may be slowing, however, with the formation of the closing price reversal top on Thursday.
A trade through 1.1570 will negate the closing price reversal top and signal a resumption of the uptrend. The next potential target is the October 16 main top at 1.1622.
Taking out yesterday’s low at 1.1485 will confirm the closing price reversal top. This will shift momentum to the downside.
The main range is 1.1816 to 1.1216. The market is currently trading inside its retracement zone at 1.1516 to 1.1587. This zone is controlling the longer-term direction of the Forex pair.
Daily Technical Forecast
Based on the early price action, the direction of the EUR/USD on Friday is likely to be determined by trader reaction to the main 50% level at 1.1516.
A sustained move over 1.1516 will indicate the presence of buyers. The first target is the uptrending Gann angle at 1.1549. Overtaking this angle will put the market in a strong position with 1.1570 the next target, followed by a Fibonacci level at 1.1587.
If 1.1587 is taken out with conviction then look for the rally to possibly extend into the main top at 1.1622, followed by a downtrending Gann angle at 1.1624.
The inability to overcome and sustain a rally over 1.1549 will be the first sign of weakness. This could trigger a pullback into the 50% level at 1.1516. This is a potential trigger point for an acceleration to the downside with the next target an uptrending Gann angle at 1.1429.
This article was originally posted on FX Empire
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