EUR/USD Mid-Session Technical Analysis for October 6, 2014

Daily EUR/USD Technical Analysis

After trading down to 1.2500 on Friday, the EUR/USD is posting an inside day with a bias to the upside. Prior to Friday’s U.S. jobs report, the Euro had been consolidating against the U.S. Dollar. This was because the European Central Bank’s monetary policy decision on Thursday was a little less than traders expected.

Most traders were looking for the announcement of more aggressive stimulus measures. Instead the ECB maintained its current status, opting instead to release additional stimulus as needed. This decision could be behind this morning’s slight upside bias.

If the rally continues today then look for a test of the long-term downtrending angle at 1.2612. The market picks up strength on a breakout over this level with the next target 1.2714.

Based on the short-term range of 1.2994 to 1.2500, the main objective of this developing rally is 1.2747 to 1.2805.

The bigger picture suggests there is plenty of room to the downside if 1.2500 fails as support. The next major target is the July 24, 2012 bottom at 1.2042. Because of the grossly oversold conditions, the market is not likely to go straight down to this level. A short-term rally is probably necessary to alleviate some of the downside pressure and to bring in fresh shorting pressure.

Hourly EUR/USD Technical Analysis

The main trend is down on the hourly chart. The new main range is 1.2698 to 1.2500, making its retracement zone at 1.2599 to 1.2622 its main upside objective.

The short-term range is 1.2500 to 1.2556. If the market stops going up on an intraday basis then watch for a pullback into 1.2528 to 1.2521. If it continues to rally then this zone will move up.

The first downtrending angle at 1.2596 is a potential upside target. The first support angle on the daily chart comes in at 1.2525, followed by 1.2513.

If there is a pullback into the short-term retracement zone and support angles then watch for buyers to step in. A successful defense of this zone will form a potentially bullish secondary higher bottom.

Watch for selling on a rally to 1.2599 to 1.2622. This will be sellers defending the downtrend.