EUR/USD Mid-Session Technical Analysis for August 30, 2017

The EUR/USD is trading lower on Wednesday, shortly ahead of the U.S. opening. Yesterday, the Forex pair formed a potentially bearish closing price reversal top. This does not mean the trend is changing but it is an indication that the selling is greater than the buying at current price levels.

President Trump is expected to announce his tax reform plan. His next step will be to gather support for the plan which his administration developed with Republicans. Given his past history with previous pieces of legislation, he is going to have to convince the Democrats to go along with the plan. If not, the process of tax reform could drag on for weeks.

Traders will also get to respond to the latest report from ADP. Its Non-Farm Employment Change report is expected to show the private sector added 185K jobs in August.

The major report is quarterly Preliminary GDP. It is forecast to show the economy grew by 2.7%, up slightly from the previous 2.6%.

FOMC Member Jerome Powell is also scheduled to speak. Recently, he said below-target inflation is “kind of a mystery” since the labor market is tightening. He also said that weak inflation gives the Fed the “ability to be patient” regarding future rate hikes.

Technical Analysis

The main trend is up according to the daily swing chart. However, the closing price reversal top may be indicating a shift in momentum to down. A trade through 1.1945 will confirm the chart pattern.

Usually a closing price reversal top leads to the start of a 2 to 3 day correction equal to about 50% to 61.8% percent of the last rally. This makes 1.1866 to 1.1817 the next likely downside target.

A trade through 1.2070 will negate the closing price reversal top. This could trigger a further rally into the major 50% level at 1.2166.

Forecast

Based on the current price at 1.1943, the direction of the market today is likely to be determined by trader reaction to 1.1945.

A sustained move under 1.1945 will indicate the presence of sellers. The daily chart shows there is plenty of room to the downside with the first target a 50% level at 1.1866. This is followed by an uptrending angle at 1.1841 and a Fibonacci level at 1.1817.

The inability to follow-through to the downside on a move under 1.1945 will signal that buyers are still coming in to defend the trend. This could create enough upside momentum to challenge a steep uptrending angle at 1.2021. Overcoming this angle will put the EUR/USD in a strong position.

Watch the price action and read the order flow at 1.1945. Trader reaction to this number should set the tone for the day.