Short-covering ahead of this week’s Fed announcements is helping to underpin the Euro on Monday. This follows three days of selling pressure late last week. The price action is likely position-squaring due to some uncertainty as to what the Fed is going to say about the timing of its next rate cut.
At 13:46 GMT, the EUR/USD is trading 1.1237, up 0.0026 or +0.23%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out 1.1204. A move through 1.1348 will change the main trend to up.
The selling actually started on June 12 when traders formed a potentially bearish closing price reversal top. The chart pattern typically indicates the start of a 2 to 3 day break equal to at least 50% to 61.8% of the last rally. As of this morning, all objectives have been met. This is the likely reason behind today’s counter-trend rally.
The main range is 1.1107 to 1.1348. Its retracement zone at 1.1227 to 1.1199 is support. This zone stopped the selling earlier today at 1.1203. Additional support is a long-term Fibonacci level at 1.1185.
On the upside, the major resistance zone is 1.278 to 1.1318.
Daily Technical Forecast
Based on the early price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the support pivot at 1.1228 to 1.1227.
A sustained move over 1.1228 will indicate the presence of buyers. If this move creates enough upside momentum then look for a potential rally into a resistance cluster at 1.1278 to 1.1288. Since the main trend is down, sellers are likely to come in on a test of this area.
A sustained move under 1.1227 will signal the presence of sellers. The next downside targets are layered at 1.1203, 1.1199, 1.1192 and 1.1185.
We’re looking for a choppy, two-sided trade ahead of the Fed announcements on Wednesday.
This article was originally posted on FX Empire
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