Given the rapid rise off of support at 1.3650 yesterday, the EURUSD currency pair is now trading higher at 1.3802.  But, the current upside barrier at 1.3850 could provide the exchange rate some hard resistance in the short term – causing signifiant downside potential in the pair.

The 1.3850 psychological barrier is being supported by additional resistance at the 1.3870 October 25th session low as well as rising trendline resistance from 1.3810-1.3850.  The aforementioned trendline barrier acts as topside channel resistance of an inverted flag formation – a signal of continuation.  Technical oscillators are additionally supportive of downside momentum, with Stochastic reading an overbought 80.58.

EURUSD 60-minute timeframe – Source:  FXTrek Intellicharts

With that said, we anticipate a move lower before any upside potential can emerge.  Initial support from a selloff at this point likely exists at 1.3703, with key tests at the 1.3690 barrier.  A penetration lower through 1.3675 would confirm a longer term leg lower in the currency pair – with targets far below at 1.3600 in the 60-minute timeframe.

Any conversely upside potential remains contingent on a break above the key 1.3850 level – as traders are likely to focus on the 1.3900 target following a breakout.