EUR/USD Mid-Session Technical Analysis for May 3, 2016

The EUR/USD is trading sharply higher at the mid-session in response to external influences. Earlier in the session, the Reserve Bank of Australia joined other developed nation central banks in easing policy, cutting by 25 basis points to 1.75 percent amid falling inflation.

Also helping to boost demand for the Euro was a sell-off in U.S. stock index futures. Driving down the single-currency was a disappointing Chinese manufacturing report.

Technically, the main trend is up according to the daily swing chart. The market is up six-days from its most recent bottom at 1.1214. On Wednesday, it will enter the window of time for a potential closing price reversal top so we may see at least one more day of strong upside action.

Based on the current price at 1.1580, the direction of the market today is likely to be determined by trader reaction to the downtrending angle at 1.1601. Earlier in the session, the EUR/USD attempted to break out over this angle, but the rally failed at 1.1616.

A sustained move over 1.1601 then taking out 1.1616 on increased volume could trigger another surge into the August 24, 2015 top at 1.1712.

A sustained move under 1.1601 will signal the presence of sellers. The daily chart shows there is plenty of room to the downside with 1.1494 to 1.1489 a potential target. However, in order to get to this level, there must be a tremendous rebound rally in the U.S. stock indices.

Look for buyers to go after 1.1601 to 1.1616 later in the session if the U.S. stock indices continue to sell-off. The Euro should continue to rally if stocks continue to weaken because it is being treated as a funding currency.