EUR/USD Mid-Session Technical Analysis for May 25

The EUR/USD is trading slightly better at the mid-session while posting an inside move. Although today’s sessions began with a downside bias, there was no follow-through to the downside. This suggests investor indecision and impending volatility.

The main trend is down according to the daily swing chart. The trend will turn up on a trade through 1.1242. A trade through 1.1132 will signal a resumption of the downtrend.

The main range is 1.0821 to 1.1616. Its retracement zone is 1.1219 to 1.1125. The market has been testing this zone since May 18. It is currently trading inside this zone for the sixth consecutive day. Trader reaction to this zone will determine the near-term direction of the Euro.

Based on yesterday’s close at 1.1139 and the current price action, the direction of the market is currently being controlled by a downtrending angle at 1.1162 and the Fibonacci level at 1.1125.

Trading between 1.1162 and 1.1125 will likely produce a choppy, two-sided trade throughout the day.

Overtaking 1.1162 will indicate the presence of buyers. It will also shift short-term sentiment to the upside. This is a potential trigger point for an acceleration into the next downtrending angle at 1.1202. This is followed by a potential resistance cluster at 1.1219 to 1.1222.

A failure to hold the Fibonacci level at 1.1125 will indicate the presence of sellers. This could trigger an acceleration to the downside with the next target an uptrending angle at 1.1091.

Look for a technical bounce on the first test of 1.1091, but if it fails then start preparing for an even steeper sell-off with the next target angle coming in at 1.0956.

Traders can also treat the March 24 bottom at 1.1144 as a pivot. Sellers took it out on Tuesday, driving the market to 1.1132 before the pressure dried up. Today, the low is 1.1134. This could be a sign that the break through 1.1144 was fueled by sell stops rather than fresh shorting. Anyone who shorted is in danger of getting caught in a bear trap. This could lead to a strong short-covering rally if they are forced to cover their positions.

Broadly speaking, however, look for an upside bias to develop on a sustained move over 1.1162 and a downside bias on a sustained move under 1.1125.