The euro is trading nearly flat against the US dollar on Friday, near its weakest point since early 2017. The catalyst for this weakness is Russian sanctions which have led to disruptions in the country’s gas supply. ‘Europe. This revives fears of an economic slowdown in the euro zone.
The common currency has fallen in recent weeks on a combination of fears for the economy suffering from the fallout from the war in Ukraine and a huge rally in the US dollar fueled by bets that the Federal Reserve will offer a series of sharp increases in interest rates. to fight inflation.
At 12:05 GMT, EUR/USD is trading at 1.0391, up 0.0012 or +0.11%. On Thursday, the Invesco CurrencyShares Euro Trust (FXE) ETF settled at $96.09, down $1.31 or -1.35%.
Yields in the Eurozone will continue to lag the US by a significant margin. Even if investors expect the European Central Bank (ECB) to raise rates out of negative territory later this year, a growing interest rate differential could drive the euro to parity with the dollar.
The monetary policy divergence between the hawkish US Federal Reserve and the dovish ECB will make it difficult to change the short-term downtrend. Therefore, the Euro is going to struggle to make a reasonable retracement of the current downtrend unless there is a major shift in Ukraine.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through the January 3, 2017 main low at 1.0339 will reaffirm the downtrend. A trade through 1.0642 will change the main trend to the upside.
The minor range is 1.0642 to 1.0354. Its pivot at 1.0498 is the closest resistance.
Daily Swing Chart Technical Forecast
EUR/USD’s direction on Friday is likely to be determined by traders’ reaction to 1.0387.
A sustained move below 1.3087 will indicate the presence of sellers. If this creates enough downside momentum, expect selling to eventually extend to 1.0339. This level is a potential trigger point for downward acceleration with the next major target being the January 8, 2003 main low at 0.9860.
A sustained move above 1.3087 will signal the presence of buyers. This move could create the bullish momentum needed to challenge 1.0498 in the near term.
Watch for sellers in the first test of 1.0498 and potential acceleration into the resistance band at 1.0642 – 1.0645 in the near term.