The December Euro is trading about .50 per cent higher ahead of the U.S.opening as traders approach tentatively the long side of the market as they await the outcome of the German parliament’s vote on expanding the European Financial Stability Facility (EFSF).
Although passage is assured, how the parliament will vote seems to be a developing concern this morning. Traders apparently are focusing on whether German Chancellor Angela Merkel can get the votes from her own party rather than having to rely on votes from the opposition parties. Rumor are swirling that a rift exists between Merkel and a few members of her ruling party.
Overnight, the December Euro is trading a little better in what appears to be a “bullish-flip” of yesterday’s break. Technically, there seems to be a slight bias to the upside developing. This is a continuation of the move which began with Monday’s simple closing price reversal bottom.
Based on the short-term range of 1.3925 to 1.3357, the key retracement zone of this range at 1.3641 to 1.3708 continues to be tested. Although this area is acting as resistance at this time, the market can easily turn bullish if the Euro begins to build support over 1.3641.
Additional strength is likely to develop if both Gann angles at 1.3678 and 1.3725 are penetrated. Right now these two angles are still controlling the short-term direction of the market. Further strength will develop if the market breaks through the last swing top at 1.3925. A move through this level will also turn the main trend to up on the daily chart, triggering perhaps an acceleration to the upside.
The technical picture is well laid out at this time. Since the Euro is being headline driven, bullish traders are just going to have to wait for good news to come out Germany before taking the next step. At this time, a cautiously optimistic tone continues to dominate the market.
