After briefly taking out a key 50% price level as well as a downtrending Gann angle, the December Euro reversed course and broke sharply, taking out steep uptrending Gann angle support at 1.3862.
Daily December Euro Swing Chart and Gann Angles
Overnight the Euro picked up where it left off with a move to the upside. Despite somewhat friendly news regarding the Euro Zone bank recapitalization plan, traders must have felt the market was overbought since there didn’t seem to be much interest in the single currency once it crossed the 50% level at 1.3850 and the Gann angle at 1.3878. The combination of these numbers formed a resistance cluster that appears to have been too much for this market to overcome.
The break through the steep Gann angle may have been triggered by stops, but nonetheless, signals a top may be forming. At this time the December Euro is in a position to post a daily closing price reversal top. This could be a potentially short-term bearish signal that could trigger a 2 to 3 day break equal to 50% or more of the last rally.
Based on the rally from 1.3142 to 1.3905, traders should watch for a possible correction into 1.3542 to 1.3433 over the near-term. In addition, uptrending Gann angle support comes in at 1.3502 today. Over the next few days this angle will move up each day, likely forming a support cluster with the 50% price level at 1.3542. Now that the main trend has turned up on the daily chart, this forecasted secondary bottom is likely to attract buyers.
Fundamentally, a top at this time in the Euro will signal doubt that the Euro Zone finance ministers will be able to put together a viable plan to save the banks and restructure Greece’s debt within a week like officials have pledged. The general consensus is the new plans have to be bold with the issues of how much money will be made available to the banks, which banks will get it and how will Greece be restructured to be specifically addressed. At the risk of using clich?s, the Euro looks like a “buy the rumor, sell the fact situation” or “what have you done for me lately”.
