Euro (€) / US Dollar ($) (EUR/USD) Mid-Session Update for December 19, 2012

The EUR/USD continued its breakout rally on Wednesday through the May 2012 top at 1.3283. Traders had their sights set on the March 12 top at 1.3385, before selling pressure hit the market shortly before the mid-session. 

Earlier in the session, the Forex pair showed its strength by muscling through a major downtrending Gann angle at 1.3240 on the weekly chart. Although it was able to reach 1.3310, the breakout rally was not as strong as anticipated, and at the mid-session, it was testing the validity of the breakout. A close under this angle will be a sign of emerging selling pressure.

The support on the daily chart is clearly defined by a pair of uptrending Gann angles at 1.3196 and 1.3180. Since these two angles are controlling the strength and direction of the market, a break under them will signal a short-term top and the possibility of a correction.

Another sign of a top today will be a lower close. Since the EUR/USD has already posted a higher high, a lower close will signal the formation of a closing price reversal top. This will be a sign of serious profit-taking and selling pressure. This pattern often leads to the start of a 2 to 3 day correction.

Typically, the closing price reversal occurs following a 7 to 10 rally. Today is the eighth day of the rally from the bottom at 1.2876 which makes the Euro ripe for a short-term top.