The euro was lower on Wednesday on renewed concerns that aggressive rate hikes by major central banks to fight inflation could slow the global economy too much or even push it into recession.
The price drop comes less than a day after a senior European Central Bank (ECB) official pushed the single currency higher after saying policymakers could raise its benchmark by 50 basis points in September.
At 12:12 GMT, EUR/USD is trading at 1.0521, down 0.0014 or -0.13%. On Tuesday, the Invesco CurrencyShares Euro Trust (FXE) ETF settled at $97.40, up $0.31 or +0.32%.
After the initial weakness, prices are now consolidating ahead of US Federal Reserve Chairman Jerome Powell’s two-day testimony before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday.
Powell could make or break the markets this week, depending on what he signals to investors about the direction of interest rates, whether inflation can be brought under control or whether the economy is heading into a recession.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, the trend is upward.
A trade through 1.0774 will change the main trend to the upside. A move to 1.0359 will signal a resumption of the downtrend.
The minor range is 1.0359 to 1.0601. EUR/USD is currently trading on the strong side of its pivot at 1.0480, making it a potential support.
The short-term range is 1.0774 to 1.0359. Its retracement zone at 1.0586 to 1.0630 is resistance. It stopped buying at 1.0601 on June 16th.
Daily Swing Chart Technical Forecast
The reaction of traders at 1.0480 will likely determine the direction of EUR/USD on Wednesday’s close.
A sustained move above 1.0480 will indicate the presence of buyers. If this move creates enough bullish momentum, look for a push towards the short term 50% level at 1.0586, followed by a higher high at 1.0601 and a short term Fibonacci level at 1.0630 .
The removal of 1.0630 could trigger an upward acceleration with the resistance band at 1.0770 – 1.0774 the next key upside target.
A sustained move below 1.0480 will signal the presence of sellers. This could trigger a hard break in the series of major lows at 1.0359, 1.0354 and 1.0339.
If Powell goes hawkish, expect the Euro to dip through 1.0480.