EUR/USD Mid-Session Technical Analysis for October 7, 2014

Daily EUR/USD Technical Analysis

The EUR/USD is consolidating today, but hovering near the highs of the last three days gives the market an upside bias. The strong comeback rally from 1.2500 also appears to be setting up the market for a breakout to the upside. The key breakout level today is a downtrending angle at 1.2694.

The short-term range is 1.2994 to 1.2500. Its retracement zone at 1.2747 to 1.2805 is the main upside target. This is followed by a downtrending angle at 1.2844.

A break back under 1.2591 will be a sign of weakness, but don’t expect an acceleration to the downside unless 1.2500 is taken out with conviction.

Last week’s European Central Bank announcement was less-hawkish than traders expected so there may be some position-squaring left before the downtrend resumes. Furthermore, the market is a little oversold so a strong short-covering rally may be necessary in order to alleviate some of the pressure.

The main trend is down so a rally back into a retracement zone is likely to create fresh shorting opportunities.

Hourly EUR/USD Technical Analysis

The main trend turned down on the hourly chart when the EUR/USD crossed the main bottom at 1.2605. The new main top is 1.2664.

The main range is 1.2500 to 1.2674. Its retracement zone is 1.2587 to 1.2567. This zone was tested earlier today when the market made a bottom at 1.2583.

The short-term range is 1.2664 to 1.2583. The retracement zone formed by this range is 1.2624 to 1.2633. This area is currently being tested. Trader reaction to this zone will set the tone for the session.

The EUR/USD will either stop between 1.2624 and 1.2633 and form a potentially bearish secondary lower top, or explode through this zone into 1.2664 to 1.2674 into the close.