EUR/USD Mid-Session Technical Analysis for October 21, 2016

The EUR/USD is trading lower at the mid-session after Thursday’s sharp break. The selling was fueled by comments by European Central Bank President Mario Draghi and the ECB’s decision to leave interest rates and stimulus levels unchanged. Furthermore, the central bank appears to have pushed any major decisions about whether to extend the stimulus into the December policy meeting.

Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed early in today’s session when the Brexit Bottom at 1.0910 was taken out. Since old bottoms tend to become new tops, we’ll be watching today to see if the selling pressure will be strong enough to sustain the break below this level.

Crossing back over 1.0910 will be the first sign of profit-taking and perhaps aggressive counter-trend buying. It will also indicate that today’s earlier break was likely triggered by sell stops.

If the selling pressure continues then we could see an eventual break into the March 10 bottom at 1.0821.

Forecast

Based on the current price at 1.0892 (1046 GMT) and the earlier price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the downtrending angle at 1.0899.

A sustained move under 1.0899 will indicate the selling is getting stronger. The major downside target today is a price cluster at 1.0821. This is a combination of a long-term uptrending angle from the December 3, 2015 main bottom at 1.0539 and the March 10, 2016 main bottom at the same price.

A sustained move over 1.0899 will signal the presence of buyers. This could trigger enough upside momentum to challenge the former bottom at 1.0910. This is the trigger point for a possible acceleration to the upside with no major target in place.

Watch the price action and read the order flow at 1.0910. Trader reaction to this angle will tell us if the buyers are regaining control, or if the sellers are still pressing the market lower.