EUR/USD Mid-Session Analysis for August 20, 2012

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The Euro is trading mixed versus the U.S. Dollar at the mid-session as traders take time to assess the latest developments. Over the week-end Der Spiegel, a weekly German publication, said that the European Central Bank was considering putting a cap on bond yields in the Euro Zone. This news helped underpin the Euro early in the trading session, but the single-currency turned lower after the German central bank, Bundesbank, voiced its opposition to such a move. With no fresh economic reports to react too, the EUR/USD reversed course and is now range bound.

Daily EUR/USD Chart

Daily EUR/USD Chart

Technically, the Euro is trading between a pair of key 50% price levels at 1.2394 and 1.2242. This combination is causing the current choppy trade. The Euro is also trading inside of a triangle chart pattern on the daily chart.

The triangle chart pattern is a non-trending pattern. The gradual narrowing of the support and resistance lines typically indicates impending volatility. This means that traders should have patience as the current set up suggests this currency pair is poised to breakout. There appears to be a bias to the upside so bullish traders should take note of the market’s current position.

Increasing momentum coupled with rising volume will be necessary to trigger a strong breakout. This is because the market will be facing resistance at 1.2385, 1.2394 and 1.2443. Once these areas are overcome, the market should be allowed to expand to the upside. If the breakout is to the downside, the first targets are 1.2255, 1.2242 and 1.2195. 

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About: FX Empire Analyst - James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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