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Since bottoming at 1.2255 on August 16, the EUR/USD has gone on a tremendous run, breaking through several key resistance levels before reaching its highest price in more than a month this morning at 1.2567.
At the mid-session, short-term overbought factors have encouraged profit-taking, triggering an intraday break into uptrending Gann angle support at 1.2495. Based on the short-term range of 1.2255 to 1.2567, a failure to hold the Gann angle could drive the market into a retracement zone at 1.2411 to 1.2374.
Since the main trend is up on the daily chart, buyers may express interest if the Euro makes a successful test of this retracement zone. Furthermore, the Euro is also beginning to show signs of bottoming on the weekly chart as previously strong resistance levels are showing signs of weakness. The main trend remains down however on the weekly chart until 1.2747 is violated.
As the Euro nears the July top at 1.2747, the tug of war between the buyers and the sellers becomes more evident. All it took was a few words of encouragement of European Central Bank President Mario Draghi to turn the Euro up from its late July bottom at 1.2042, but it is going to take decisive action by the ECB to actually change the main trend to up on the weekly chart. Until this occurs, the EUR/USD could become rangebound and trade in a choppy manner.
Fundamentally, investors have used a key meeting between European officials and Greece as a solid excuse to pare positions, leading to today’s weakness. At issue is Greece’s ability to pay back the bailout money offered by the Euro Zone’s finance ministers.Germany is worried that Greece has not done enough to cut expenses while Greece wants an extension of time to pay back the money.
This hard line stance by Germany is encouraging traders to cut their long positions out of fear it could escalate into something more severe.