Daily December Euro Pattern, Price & Time Analysis
Following a 2 percent decline on Monday, the December Euro continued its slide overnight paring another 1.0%. The sharp break is being triggered by renewed concerns that Greecewill default and that the European Central Bank was considering an interest rate cut.
The news that Greek Prime Minister Papandreau pledged to put the European Union’s decision on how to deal with his nation’s finances to a referendum is not sitting well with the global markets. Many see this as a stall tactic and another sign that last week’s EU resolution to fix Europe’s debt woes is doomed to unravel. The fear and uncertainty created by the situation is driving investors to the safety of U.S. Dollar and Japanese Yen. Worldwide liquidation of equities is another sign that sentiment is shifting toward a risk off scenario.
The size and speed of the break in the Euro is a sign that the market is currently in the hands of the bearish traders. This triggering of renewed fears and risk aversion are the key reasons why bullish confidence is waning and that last week’s rally is beginning to look more like a blow-off rally. Indeed, traders are now looking at last Thursday’s tremendous run-up and appear to be asking European leaders, “What have you done for me lately”.
With Greece nearing default, the Euro is in a position to lose one of the three main reasons for last week’s euphoric rise. Default activity byGreeceis putting the global financial markets on a path of disorder and destruction that threatens the Euro Zone economy. This is the main reason why the European Central Bank has to consider lowering interest rates at this time.
For weeks the EU was told that it only had a short-time to get its house in order. It now appears that they may have acted too slowly as the world seems to be bracing for another economic meldown.
Technically, the December Euro has retraced 50% of its rally from 1.3142 to 1.4241. Traders should watch for a possible technical bounce to the upside following this first test of 1.3692. Further downside pressure could drive the market into the 61.8% retracement zone at 1.3562. Uptrending Gann angle support comes in at 1.3542, making 1.3562 to 1.3542 the next downside target zone and potentially important support cluster.
