EUR/USD Mid-Session Analysis for October 17, 2012

By FX Empire Analyst - James Hyerczyk
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Since breaking out over a trend line on Tuesday, the EUR/USD continues to surge, putting it in a position to challenge the September 17 top at 1.3172. This price is also the September high. A move through this level will mean a continuation of the rally from the July bottom.

The almost one month sideways action in the EUR/USD has created a rectangle formation bounded by the September 14 top at 1.3172 and the October 1 bottom at 1.2803. The current upside momentum suggests an impending breakout to the upside.

The Gann angles are also indicating strength. Since bottoming at 1.2825 on October 11, the EUR/USD is moving at a pace of .008 per day. This makes 1.3145 a potential upside target today. On the downside, support has moved up to 1.2985.

Because of the steep nature of the current rally, the EUR/USD is ripe for a correction. The first sign of a short-term top will be an intraday closing price reversal top. Typically, this takes place on the 60-minute chart. If the market does make a higher-high and a lower-close, the potential down move is expected to be corrective in nature rather than trend changing. 

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