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The EUR/USD is trading slightly higher at the mid-session in light trading because of the U.S. Labor Day holiday. Volume should pick up on Tuesday, but could gradually slow ahead of the European Central Bank meeting on September 6.
Today’s activity is an inside day. This occurs when the high is less than the previous day’s high and the low is higher than the previous day’s low. It usually precedes volatility which we expect to see on September 6.
The resistance today is at 1.2610. This is a slow-moving, long-term Gann angle from the 1.2747 top. Today’s high is 1.2610, proving the importance of this angle. A break through this level will put the market in a position to challenge Friday’s high at 1.2637. Regaining an uptrending Gann angle at 1.2622 will be a sign that the market is gaining strength.
On the downside, an uptrending Gann angle from 1.2255 is providing support at 1.2495 today. This support line has actually formed an up channel with the other uptrending Gann angle at 1.2622. If strong momentum takes over the market then expect to see breakouts, but if the EUR/USD begins to trend higher then it could trade inside the channel for a prolonged period of time.
The main trend is up. A trade through 1.2465 will turn it down. Unless there is a higher-high than the previous day and a lower close, otherwise known as a closing price reversal top, the Euro/U.S. Dollar is expected to continue to trend.
Traders are looking for the European Central Bank to announce it will begin a bond-purchasing program. This should underpin the market and could trigger a breakout rally. In addition, a weaker U.S. Non-Farm Payrolls number on Friday could push the U.S. Dollar lower, giving the Euro a boost.