EUR/USD Mid-Session Technical Analysis for May 4, 2016

The EUR/USD is trading lower at the mid-session. The early sell-off represents a continuation of the massive break on Tuesday.

The main trend is up according to the daily swing chart. However, yesterday’s closing price reversal top signals a shift in momentum to the downside. This chart pattern often leads to a 2 to 3 day break equal to at least 50% of the last rally. It was confirmed earlier in the session when yesterday’s low at 1.1495 was taken out.

The main range is 1.1214 to 1.1616. Its retracement zone at 1.1415 to 1.1368 is the primary downside target.

If the short-term range remains 1.1616 to 1.1469 then its 50% level at 1.1543 becomes the primary upside target on the upside.

Based on the current price at 1.1479, the direction of the market today is likely to be determined by trader reaction to the downtrending angle at 1.1488 and the uptrending angle at 1.1494.

A sustained move under 1.1488 will signal the presence of sellers. The daily chart shows there is room to the downside with the next target a 50% level at 1.1415. This is followed by a Fibonacci level at 1.1368 and an uptrending angle at 1.1354.

Overtaking 1.1488 will indicate the presence of buyers. However, we could see an acceleration to the upside if buyers can overcome the uptrending angle at 1.1494.

A sustained move over 1.1494 will indicate the buying is getting stronger. This could create enough upside momentum to challenge the short-term 50% level at 1.1543.

If traders are getting ready to turn the trend down then they are likely to show up on a test of 1.1543. If buyers can overcome this level then look for the rally to extend into at least 1.1616. A trade through this price will negate the closing price reversal top and could trigger another acceleration to the upside.

Simply stated, look for an upside bias to develop the rest of the day on a sustained move over 1.1494 and a downside bias on a sustained move under 1.1488.