Euro (€) / US Dollar ($) (EUR/USD) Mid-Session Update for December 12, 2012

The EUR/USD surged earlier in the trading session on increased demand for higher-yielding assets. The weaker dollar is contributing to the move as traders expect the Fed to announce additional stimulus measures later today. The action by the Fed may already be cooked into prices so the Euro may be vulnerable to a near-term correction. Additionally, the Fed may announce a program that is less than the anticipated $45 billion package which could also trigger an intraday reversal. 

Based on the near-term range of 1.3126 to 1.2876, the market formed a retracement zone at 1.3001 to 1.3030. This was expected to be a key area because it could either be resistance or a launching pad for higher prices. If it becomes resistance then the market may begin to form a secondary lower-top. This would be a strong sign that the Euro is getting ready to turn lower. 

Traders found support on the 50% price at 1.3001 while increased momentum helped take out the Fibonacci resistance at 1.3030. Both of these levels have the potential to become support if the EUR/USD can sustain today’s rally throughout the session. 

Uptrending Gann angle support is at 1.2996. This helps form a potential support cluster with the 50% level. This key support zone is 1.3001 to 1.2996. There may be a technical bounce if this area is tested; however, a trade through it will be a strong sign that sentiment is shifting to the downside. 

A downtrending Gann angle at 1.3026 and the 61.8% level at 1.3030 were taken out, but could become a resistance zone later in the session if the EUR/USD weakens. This is essentially today’s pivot zone. An extension of the rally could trigger a drive to 1.3076 while a complete breakdown will likely mean a move to 1.2936 over the next few days.