The EUR/USD is under pressure shortly before the U.S. opening. Trading has been volatile throughout the session with the Euro posting a two-sided trade. Fundamentally, traders are reacting to a setback to Chancellor Angela Merkel’s chances of forging a “grand coalition” in Germany.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The trend was reaffirmed earlier today when the EUR/USD traded through the recent high at 1.2296. However, momentum may be shifting to the downside with the possible formation of a potentially bearish closing price reversal top.
Currently, the EUR/USD is trading below yesterday’s close at 1.2260. A close below this level will form the reversal top. This could trigger the start of a 2 to 3 retracement and a possible 50% correction of the current rally. Treat this price like resistance.
The main 50% level is 1.2166. This price is controlling the longer-term direction of the EUR/USD.
The short-term range is 1.1915 to 1.2323. Its retracement zone at 1.2119 to 1.2071 is the primary downside target.
Daily Technical Forecast
Based on the early price action and the downside momentum, the tone of the market today is likely to be determined by trader reaction to yesterday’s close at 1.2260.
A sustained move under 1.2260 will signal the presence of sellers. This could drive the EUR/USD into the support cluster at 1.2166 to 1.2155. Look for a technical bounce on the first test of this area. If 1.2155 fails then the selling could extend into a long-term uptrending Gann angle at 1.2136 then the 50% target at 1.2119.
Overtaking and sustaining the rally over 1.2260 will indicate the presence of buyers. This could create the upside momentum to challenge the high at 1.2323.
This article was originally posted on FX Empire
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