The March Euro futures contract is under pressure this morning, but still holding above last week’s low at 1.3027. In fact, the market remains inside of a six day range formed by the January 27 top at 1.3237 and the February 1 bottom at 1.3027. The mid-point of this range is 1.3132. This price level should act as a pivot over the short-run. At this time, the single currency is on the bearish side of the tight formation.
The longer the Euro stays inside this tight range, the more anxious traders will become and the more likely there is going to be a volatile breakout. The direction cannot be determined at this time. Although the main trend is up on the daily chart, today’s action suggests there is a growing bias to the downside. Traders should refer to the pivot price mentioned earlier to gauge trader sentiment.
Two other important ranges are currently controlling the short-term direction of the market. The first is the main range created by the December 2 top at 1.3561 to the January 13 bottom at 1.2627. The retracement zone created by this range is 1.3094 to 1.3204. The upper level of this range stopped the market 6 out of the last 7 days. Today’s action has taken out the lower end of the retracement zone, putting a bearish spin on the Euro.
The next important range was formed by the January 13 bottom at 1.2627 and the January 27 top at 1.3237. The retracement zone of this range is 1.2932 to 1.2860. This 50 percent to 61.8 percent zone is the next major downside target.
Accompanying these two retracement zones is downtrending Gann angle resistance at 1.3121 and uptrending Gann angle support at 1.2947.
Fundamentally, uncertainty over a resolution to the Greece debt crisis has re-entered the minds of traders, threatening to unravel January’s entire rally. Traders fear that Greece will not accept the strict terms of a new bailout deal needed to avoid a potential sovereign debt default. With debt repayments due in March, the Greek government is under tremendous pressure to agree to the new austerity terms that include wage cuts.
The slow progress is encouraging long traders to pare their positions. In addition, a few members of the European Union are starting to worry that the inability to reach a decision will undermine investor confidence, leading to similar financial market turmoil seen throughout the fall.
The severity of the situation should be judged by how fast traders have been able to erase from their memories the good news generated by Friday’s bullish U.S. jobs data. Today’s weakness suggests that Euro traders are more likely to act first and ask questions later.
