Friday’s sell-off in the March Euro was impressive, but the market was still able to close higher for the week, so for the time being all three time periods – monthly, weekly and daily still have an upward bias. Last week’s rally also took out a daily swing top at 1.3237. This action confirmed the January closing price reversal bottom at 1.2627.
The daily chart suggests the Euro has reached a critical decision point for traders. The short-term range is 1.3027 to 1.3325 with the mid-point of this range at 1.3176. Combined with an uptrending Gann angle from the 1.3027 bottom at 1.3167, this cluster stopped the break on Friday. You can find it on the chart too. Just look where the 50 percent level crossed the uptrending Gann angle.
On Monday the 50 percent level will remain the same, but the Gann angle will move up to 1.3187. The Euro will have to hold this angle to maintain its upside momentum. If you break it down further, the market has formed a new range that is probably better seen on the intraday charts. This range is 1.3325 to 1.3157. The mid-point of this range is 1.3241. Look for this price to act as a pivot today: Bullish Above and Bearish Below.
Until something concrete comes out of Greece regarding its debt resolution package, the Euro may be locked inside of a tight range. This isn’t necessarily a bad thing since it often leads to volatility. So while the market sits inside of a tight range, perhaps forming a non-trending pattern like a triangle on the intra-day charts, traders should brace for upcoming volatility.
After closing near its low on Friday, the Euro rebounded with a higher opening Sunday night. This strength didn’t hold as the market has given back much of its early gains. The primary reason for the early session “euphoria” was the news that Greece’s parliament approved a package of austerity measures over the week-end. This move proved to be unpopular with the Greek citizens, but traders seemed to approve although the early “pop” was probably short-covering rather than new buying.
While some traders feel that the approval of the austerity measures provides a straight path toward getting the bailout money to avoid default, the key concern remains implementation of the programs. So for the time being, traders are going to factor in the possibility of a Greek default and the remote possibility that it will be booted out of the Euro Zone. The price action doesn’t suggest the latter, but over the near-term traders should keep an eye on the news to see if any EU politicians, in an effort to express frustration, begin to suggest that this idea is on the table.
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