The EUR/USD is trading higher at the mid-session, but backing off from its earlier intraday high. The catalysts behind the price action are short-covering and position-squaring ahead of the European Central Bank policy announcement on Thursday, lower U.S. Treasury yields and the confirmation of a potentially bullish technical chart pattern.
The main trend is down according to the daily swing chart. However, momentum shifted to the upside on Monday with the formation of a potentially bullish closing price reversal bottom chart pattern, and on Tuesday by the confirmation of this chart pattern.
The new minor bottom is 1.0963. A trade through this bottom is likely to lead to a test of the Brexit Bottom at 1.0910.
The main retracement zone at 1.1084 to 1.1138 is a potential upside target.
The short-term range is 1.1279 to 1.0963. Its retracement zone at 1.1121 to 1.1158 is a potential upside target.
Combining the two retracement zones creates a strong upside target at 1.1121 to 1.1138. In order to get to this zone this week, we’ll have to get some bullish help from the European Central Bank on Thursday, or we’ll have to see a steep sell-off in the global bond market.
Based on the current price at 1.1003, the key level on the upside is the uptrending angle at 1.1029 and on the downside 1.0990.
The daily chart indicates there is plenty of room to the upside on a breakout over 1.1029. This move could create enough upside momentum to challenge the main Fibonacci level at 1.1084. This is followed by the downtrending angle at 1.1119.
Taking out the uptrending angle at 1.0990 will indicate the presence of sellers. This is followed by the closing price reversal bottom at 1.0963, a long-term uptrending angle at 1.0961 and a downtrending angle at 1.0959.
Crossing to the weak side of the downtrending angle at 1.0959 will put the EUR/USD in a bearish position with the next major target the Brexit Bottom at 1.0910.
Basically, the early price action suggests a strong upside bias will develop on a move over 1.1029 and a bearish tone on a move under 1.0990.