EUR/USD Mid-Session Analysis for July 31, 2013

Daily Chart

Following a move to 1.3301 on Tuesday, the EUR/USD sold off sharply, only to attract new buying at 1.3213. The subsequent rebound has put the market in a position to take out yesterday’s high. This action could trigger a quick rally to 1.3342 then eventually to 1.3415. It’s difficult to see how the EUR/USD can rally unless the Fed reduces the likelihood of implementing its stimulus program when it issues its policy statement.

The daily chart suggests there is plenty of room to the downside with 1.3028 to 1.2964 a potential downside target over the near-term. The inability to takeout 1.3301 today will mean the closing price reversal top formation is still intact and could trigger the start of a further decline.

Hourly Chart

At the mid-session, the EUR/USD is range bound with 1.3299 the top and 1.3213 the bottom. The retracement zone of this range at 1.3266 to 1.3256 is acting like a pivot with the market straddling both sides. Once the Fed issues its latest statement later this afternoon, investors will get an idea of the value of this zone.

Holding above 1.3266 should trigger an eventual move through 1.3301. A sustained move through 1.3256 should trigger an eventual test of 1.3213.