The Euro is edging lower early Tuesday as U.S. Treasury yields rose for a third session. The move helped underpin the U.S. Dollar. Nonetheless, the single currency is still on course for its best month in a year as traders reposition in anticipation of European Central Bank (ECB) rate hikes and indications the U.S. Federal Reserve may slow the pace of its rate hikes.
At 03:44 GMT, the EUR/USD is trading 1.0750, down 0.0030 or -0.28%. There was no trading on Monday, but on Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $99.36, up $0.36 or +0.09%.
Jump in German Inflation Signals Need for ECB Rate Hike
German inflation rose to its highest level in nearly half a century in May on the back of soaring energy and food prices, strengthening the case for a big, half a percentage point European Central Bank interest rate hike in July.
Although the ECB responded to soaring prices relatively late compared to its global peers, the bank made clear last week that interest rates must go up to stop high inflation from getting entrenched.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 1.0787 will signal a resumption of the uptrend.
A move through 1.0354 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the market is currently inside the window of time for a potentially bearish closing price reversal top.
The minor trend is also up. A trade through 1.0642 will change the minor trend to down. This will shift the momentum.
The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 – 1.0868 stopped the rally on Monday at 1.0787. It is controlling the near-term direction of the EUR/USD.
The intermediate range is 1.0936 to 1.0354. The market is currently trading on the strong side of its retracement zone at 1.0714 to 1.0645, making it potential support.
The short-term range is 1.0354 to 1.0787. If the minor trend changes to down then look for the selling to possibly extend into its retracement zone at 1.0571 to 1.0519.
Daily Swing Chart Technical Forecast
Trader reaction to the 50% level at 1.0770 will likely determine the direction of the EUR/USD on Tuesday.
Bearish Scenario
A sustained move under 1.0770 will indicate the presence of sellers. The first target is a Fibonacci level at 1.0714. Taking out this level will indicate the selling pressure is getting stronger. This could trigger a further break into the support cluster at 1.0645 – 1.0642.
Bullish Scenario
A sustained move over 1.0770 will signal the presence of buyers. Taking out 1.0787 will indicate the buying is getting stronger. This could trigger a near-term surge into the Fibonacci level at 1.0868.
Side Notes
The EUR/USD hit its objective at 1.0770 – 1.0868. Since the first rally from a major bottom is usually fueled by short-covering, the single currency may have to retrace 50% – 61.8% of the first leg up in order to attract real buyers. This makes 1.0571 to 1.0519 a value area and the next major downside target.
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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Source: https://finance.yahoo.com/news/eur-usd-forex-technical-analysis-041826260.html