EUR/USD Mid-Session Technical Analysis for May 26, 2017

The EUR/USD is trading slightly higher at the mid-session. Weak price action in the dollar is helping to support the Euro. Volume is light after yesterday’s European holiday and ahead of the long U.S. holiday week-end.

Investors are keeping an eye on Sicily, Italy, where G-7 leaders are meeting to discuss matters including trade and climate change. European leaders may try to bridge the growing policy gap with U.S. President Donald Trump.

Political issues continue to follow the Trump administration with President Trump’s son-in-law and senior White House advisor Jared Kushner reportedly under investigation over his alleged ties with Russia.

Finally, Federal Reserve policymaker James Bullard said while speaking overnight in Tokyo that the path of inflation in the U.S. is “worrisome”. The U.S. central bank’s plan for raising interest rates in the coming years is also too aggressive, asserted the St. Louis Fed president, who is a noted dove.

Bullard’s statement cause a minor sell-off in U.S. Treasury bonds, helping to drive down the U.S. Dollar.

Technical Analysis

The main trend is up according to the daily swing chart. However, the recent rally has stalled with the formation of the closing price reversal top at 1.1268 on May 23. A trade through this level will negate the chart pattern and signal a resumption of the uptrend.

Overtaking 1.1268 could create enough upside momentum to challenge the November 9, 2016 main top at 1.1299 and the September 8, 2016 main top at 1.1327.

A trade through 1.1168 will change the minor trend to down, which could trigger a further break into the short-term retracement zone at 1.1054 to 1.1003.

Forecast

Based on the current price at 1.1223 and the earlier price action, the direction of the EUR/USD the rest of the day is likely to be determined by trader reaction to the downtrending angle at 1.1210.

A sustained move over 1.1210 will indicate the presence of buyers. This could generate the upside momentum needed to challenge 1.1268, an uptrending angle at 1.1279 and he pair of old tops at 1.1299 and 1.1327.

A sustained move under 1.1210 will signal the presence of sellers. There is room to the downside with the first target the minor bottom at 1.1168, followed by the downtrending angle at 1.1123. This is a potential trigger point for an acceleration into a potential support cluster at 1.1059 to 1.1054.