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Thursday, May 19, 2022

EUR/USD Consolidates; Solid above 1.1011, weak below 1.0963

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The euro is rising against the dollar on Monday as investors brace for an intense week to come filled with meetings of the world’s major central banks.

After the uncertainty about the war in Ukraine and the surprise of the European Central Bank (ECB) caused a three-day crash, the euro recovers thanks to an improvement in the demand for risky assets that is accompanied by a drop in commodities primate.

Regarding this improvement in sentiment towards risk, it should be noted that the reason is the progress that is being made in the negotiations that are trying to get Russia and Ukraine to reach peace.

At 12:17 GMT, the EUR/USD exchange rate was 1.0952, down 0.0037 or +0.34%. On fournes, the Invesco CurrencyShares Euro Trust ETF (FXE) are liquid at $101.23, down $0.57 or -0.56%.

Gains are likely to be capped by expectations that the US Federal Reserve will raise interest rates at the end of its two-day policy meeting, which starts Tuesday and ends Wednesday. On this hypothetical rise in rates, investors now believe that there would be a 93% chance that interest rates will rise by 25 basis points. In addition, traders also prepared for up to seven interest rate hikes throughout this year due to the fact that the president of the Federal Reserve, Jerome Powell, already dropped last week that in 2022 there would be several rate hikes.

Technical analysis of the daily swing chart

The main trend is down according to the daily reversal chart but if we cross above 1.1121 it will turn bullish while falling below 1.0806 will resume its way down.

The first minor range is from 1.0806 to 1.1121 and its pivot at 1.0963 sets a resistance. The second minor range would be from 1.1121 to 1.0901 and its pivot at 1.1011 would be another potential resistance level.

The strongest resistance area would be bounded by a couple of 50% levels between 1.1098 and 1.1151, also within that area is the main top of the 1.1121 level.

Daily chart EUR/USD

Daily Spin Chart Technical Forecast

Monday’s EUR/USD direction will be determined by trader reaction as a major pivot situation at 1.0963.

bullish scenario

A sustained move above 1.0963 signals the presence of buyers and could quickly lead us to a test of the 1.1011 level.

We think testing that benchmark could attract sellers but if we break above 1.1011 then an acceleration to the upside could be triggered, with the next key target coming in at the resistance group 1.1098, 1.1121 and 1.1151.

The logical thing is that the sellers enter the market as soon as we put a test to that resistance group and basically the buyers have to overcome the reference located at 1.1151 before we can consider going long.

bearish scenario

A sustained move below 1.0963 will signal the presence of sellers and if this move builds downside momentum then expect a bearish break to 1.0901 to form sufficiently, at the very least.

A trade through 1.0901 will signal the return of sellers and could create the necessary downside momentum to end up testing the main bottom at 1.0806, which in turn would be another potential trigger point for an acceleration to labaja

This article was originally published on FX Empire

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