Even though the U.S. Federal Reserve set a softer tone for the U.S. Dollar on Wednesday, the Daily June Euro is trading lower overnight after the European Commission reported that its April economic sentiment indicator for the Euro Zone fell to 92.8 from 94.5 the previous month. Traders were looking for a reading of 94.2. Yesterday the Fed kept interest rates at near zero while hinting that more asset buying was a possibility should the economy begin to stumble. This news triggered some minor selling against the Greenback.
Technically, the Daily June Euro futures contract is trading lower after attracting selling pressure near a pair of downtrending Gann angles at 1.3274 and 1.3281. The main angle from 1.3494 was tested previously in late March and early April and proved to be strong resistance. In addition to finding resistance near the Gann angles, the Euro also entered the retracement zone created by the 1.3494 to 1.3000 range at 1.3247 to 1.3305. All of these technical factors had a hand in encouraging long traders to take profits and bearish traders to refresh their short positions.
On April 20, the main trend turned up on the daily chart when the Euro crossed the previous main top at 1.3218. The move took place without much fanfare with the single currency eventually reaching the overnight high at 1.3266. This probably means that the breakout was triggered by short-covering rather than new buying.
With pressure building on the down side this morning, traders should look for a possible break into an uptrending Gann angle at 1.3160. In an extreme case, the Euro could correct 50% of the rally from 1.3000 to 1.3266. This price level is at 1.3133.
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