The EUR/USD is inching lower on Tuesday after testimony from new Federal Reserve Chair Jerome Powell. Traders are watching the even closely to see whether Powell will continue on the gradual monetary rate path pursued by his predecessor Janet Yellen, or whether he will take a more hawkish approach.
Earlier today, Powell downplayed concerns over recent market volatility, and said the central bank remains on course for more interest rate hikes. He also emphasized that the job market remains robust, consumer spending is solid and wage growth is accelerating. Finally, Powell reiterated the Fed has been aiming to boost inflation to 2 percent, but the recent pickup in monthly readings has spooked some investors.
Daily Swing Chart Analysis
The main trend is up according to the daily swing chart, however, momentum has been trending lower since the closing price reversal top on February 16. On February 22, the EUR/USD posted a minor closing price reversal bottom. This has temporarily stopped the downside momentum. Trading sideways for four sessions suggests investor indecision and impending volatility.
A trade through 1.2259 will negate the reversal bottom and indicate the selling is getting stronger. This could drive the EUR/USD into the next main bottom at 1.2205. Taking out this level will change the main trend to down with the next potential targets a major 50% level at 1.2166 and another main bottom at 1.2164. Crossing to the weak side of these levels could trigger the start of an acceleration to the downside.
On the upside, short-term resistance is a Fib level at 1.2339, followed by 50% levels at 1.2380 and 1.2407. Another Fib level offers resistance at 1.2442.
Daily Swing Chart Forecast
Based on the current price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the Fib level at 1.2339.
A sustained move under 1.2339 will signal the presence of sellers. This could lead to a test of 1.2259, followed by 1.2205, 1.2166 and 1.2164.
Overtaking 1.2339 will indicate the presence of buyers. This could trigger a labored rally with targets at 1.2380, 1.2407 and 1.2442.