EUR/USD Forex Technical Analysis – Powell’s Hawkish Tone Drives Euro Back Under Parity

The Euro is trading lower late Friday after falling sharply from its intraday high as investor sentiment buckled on Federal Reserve Chair Jerome Powell’s hawkish tone to battling inflation.

The U.S. Dollar jumped against the single-currency after Powell said the Fed will raise borrowing costs as high as needed to restrict growth, and would keep them there ‘for some time’ to bring down inflation.

Powell’s remarks crushed investors’ hopes that the Fed’s aggressive approach to hikes might be modified soon, particularly after data showing that U.S. inflation eased considerably in July.

After Powell’s speech, the chances of a 75 basis point rate hike by the Fed in September surged to 61%. The odds of a 50 basis point rate hike moved down to 39%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is edging higher. A trade through .9901 will signal a resumption of the downtrend. A move through 1.0368 will change the main trend to down.

The minor trend is also down. A trade through 1.0089 will change the minor trend to up.

Momentum shifted to the upside following the confirmation of the closing price reversal bottom on August 23.

On the upside, the nearest resistance is a pair of 50% levels at .9995 and 1.0052.

Short-Term Outlook

The direction of the EUR/USD into the close on Friday is likely to be determined by trader reaction to the pivot at .9995.

Bearish Scenario

A sustained move under .9995 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the main bottom at .9901. If this level fails then look for the selling to possibly extend into the December 2, 2002 main bottom at .9860.

Bullish Scenario

A sustained move over .9995 will signal the presence of buyers. If this move generates enough upside momentum then look for the move to possibly extend into the pivot at 1.0052, followed by the minor top at 1.0089.

Taking out 1.0089 will change the minor trend to up and could trigger a surge into a pivot at 1.0135.