The EUR/USD plunged to its lowest level since November 14 after German PMI data fell to a 20-month low indicating that economic momentum in Europe’s biggest economy was faltering. The Euro was also pressured by concern over political risk in Italy. The fiscally profligate new coalition government in Rome has raised concerns of a showdown with the European Union.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. After short reprieve earlier this week, the downtrend resumed on today’s move through 1.17165. The move also took out the November 21 main bottom at 1.1712, a further confirmation of increasing selling pressure.
The minor trend is also down. A trade through 1.1830 will change the minor trend to up and shift momentum to the upside. .
Daily Swing Chart Technical Forecast
Based on the early trade, the direction of the EUR/USD is likely to be determined by trader reaction to the former bottom at 1.1712.
A sustained move under 1.1712 will indicate the selling pressure is getting stronger. The daily chart indicates there is plenty of room to the downside before the next support level. If the downside momentum increases on the move then the next major target becomes the November 7 main bottom at 1.1553.
Recovering the major bottom at 1.1712 will signal the return of buyers. This could fuel an intraday short-covering rally. Overcoming 1.1778 will put the EUR/USD in a position to form a potentially bullish closing price reversal bottom.
Watch for volatility with the release of the Fed minutes at 1800 GMT. The first sign of strength will be a recovery of 1.1712. The next key area that needs to be recovered is 1.1778 then 1.1830. Otherwise, the EUR/USD will remain on a path towards 1.1553.