Throughout the European debt crisis, the ECB has maintained the stance that it is not a lender of last resort while at the same time sticking to its mandate to provide price stability to the region. With conditions worsening in Spain and Italy, the central bank appears to be ready to provide more aggressive direct aid to these two countries. Short-traders who have dominated the Euro for almost the entire month, pared positions this morning as demand for higher risk assets began to rise on speculation the ECB was poised to act quickly and decisively.
June Euro Futures Gann Analysis Chart
Technically, despite the rapid turnaround this morning, the June Euro is still battling resistance at 1.2407. If this downtrending Gann angle can be overtaken, then traders should look for a test of another resistance angle at 1.2503.
If a closing price reversal bottom is formed, then traders should look for the start of a 2 to 3 day rally equal to at least 50% of the last break. Based on the short-term range of 1.2826 to 1.2358, a strong short-covering rally could trigger a move to 1.2592 – 1.2647 over the near-term. Since the main trend is down, short-sellers are likely to refresh their positions following a test of this potential resistance zone.
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