EUR/USD Forex Technical Analysis – Pressured by Uncertainty Over Size of Fed Rate Hike

The Euro is edging lower on Monday, posting an inside move that suggests investor indecision and impending volatility.

Volume is a little on the light with most of the major players moving to the sidelines ahead of a multitude of central bank interest rate announcements including Wednesday’s highly anticipated U.S. Federal Reserve rate hike.

At 13:02 GMT, the EUR/USD is trading .9986, down 0.0029 or -0.29%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $92.43, up $0.18 or +0.20%.

The Euro has been under pressure against the U.S. Dollar since data last week showed a broadening in underlying U.S. consumer inflation increases. Since then, the markets have entertained the possibility of a 100 basis point rate hike when the Fed concludes its two-day meeting on Wednesday. Financial market traders are fully pricing a 75 basis point Fed rate hike this week and a roughly 20% chance of a 100 basis point increase.

In domestic news, the European Central Bank could raise interest rates next year, causing pain for consumers as it tries to depress demand that is increasingly adding to sky-high inflation, chief economist Philip Lane said on Saturday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .9864 will change the main trend to down. A move through 1.0198 will signal a resumption of the uptrend.

The minor trend is also up. A trade through .9945 will change the minor trend to down. This will shift momentum to the downside.

The first minor range is .9945 to 1.0037. The EUR/USD is currently straddling its pivot at .9991.

On the upside, potential resistance targets come in at 1.0031, 1.0072 and 1.0116.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .9991 is likely to determine the direction of the EUR/USD on Monday.

Bearish Scenario

A sustained move under .9991 will indicate the presence of sellers. The first downside target is .9945. Taking out this level could trigger the start of an acceleration to the downside with the next target a support cluster at .9864 to .9860.

Bullish Scenario

A sustained move over .9991 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the resistance cluster at 1.0031 to 1.0037. Taking out this area could trigger a spike into 1.0072.