The EUR/USD is trading higher after hitting a 20-month low earlier in the session. Sellers drove the market into 1.0503, but couldn’t take out the March 13, 2015 main bottom at 1.0462. This helped trigger a short-covering rally that drove the Forex pair through last week’s high at 1.0685 and into 1.0729.
The market is now in a position to post a potentially bullish closing price reversal bottom. Although this chart pattern does not mean the trend is changing to up, it does indicate that the buying may be greater than the selling at current price levels. It also indicates that buyers are willing to defend the major bottom at 1.0462.
The main range is 1.1299 to 1.0503. If the rally continues then its retracement zone at 1.0901 to 1.0995 will become the primary upside target. A downtrending angle also passes through this zone at 1.0939 making it a valid upside target also. Since the main trend is down, there may be technical bounce on the first test of this zone.
Today’s range at 1.0503 to 1.0729 is also the short-term range. Its 50% level or pivot is 1.0616. This price is controlling the short-term direction of the market. A sustained move over this price will indicate the presence of buyers. A sustained move under this price will signal that sellers have retaken control.
The rest of the session, we’re going to watch the price action and read the order flow at 1.0729 and 1.0616. Because of the upside momentum, I’m not a big fan of selling into 1.0729, but I’d be willing to play the long side through this intraday top.
If there is a move into 1.0616 then I’d consider buying for a counter-trend position. I’d probably reverse if 1.0616 fails as intraday support.
I’m looking for sustained volatility and a two-sided trade the rest of the day. Look for the upside bias to continue on a sustained move over 1.0729 and for renewed downside pressure on a move through 1.0616. Holding in between these numbers will likely lead to sideways price action while indicating investor indecision.