The Euro traded in a tight range after holding a test of a major 50% level at 1.2605. Trading dried up after the release of two worse than expected U.S. economic reports this morning. Traders may have been looking forward to tomorrow’s keynote speech by Fed Chairman Ben Bernanke at the central banker’s conference in Jackson Hole, Wyoming.
This morning, the U.S. reported a worse than expected Durable Goods number. This triggered a higher spike on the chart from 1.2611 to 1.2668. Later in the morning, U.S. New Home Sales were reported lower than expected. The initial move was to the upside, but sellers quickly drove the Euro down from the top as money began to shift out of Treasuries and into equities. The subsequent break took the market to 1.2620, holding the key 50% level at 1.2605.
Technically, the action looks positive for the Euro. On Tuesday this market made a daily closing price reversal bottom, indicating buying interest. The current developing pattern suggests a possible 2 to 3 day rally back to 1.2754 to 1.2793. All of this is possible as long as the market can hold above 1.2605. A break through this level could trigger an acceleration to the downside to 1.2433.
The GBP USD traded steady to better this morning following the release of a worse than expected U.S. Durable Goods report. Since topping at 1.5997 on August 6, the Pound/Dollar has been walking down a downtrending Gann angle at 1.5477 this morning.
Based on the July/August rally from 1.5123 to 1.5997, a new retracement zone has been created at 1.5560 to 1.5457.
Combined with the Gann angle, this creates a resistance cluster at 1.5457 to 1.5477. As long as the market remains under this cluster look for downside pressure. The daily chart indicates that there is plenty of room to the downside, with a major 50% level at 1.5113 the next likely downside target.
Treasury Bonds fell and U.S. stocks rallied on Wednesday in a clear-cut asset allocation move. This helped trigger a reversal bottom in the Australian Dollar and a reversal top in the Dollar/CAD. If stocks rally on Thursday, then look for the Aussie and the Canadian Dollar to continue their short-covering rallies. There was no evidence of a major bottom so expect the move to last about 2 to 3 days.
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