Euro (€) / US Dollar ($) (EUR/USD) Mid-Session Update for December 26, 2012

After posting an inside day on December 24, the EUR/USD expanded its range to the upside with a move to 1.3253. The rally actually did nothing to the structure of the chart pattern except keep prices in the upper end of the monthly range. 

The main trend is still up on the daily chart despite the two-day setback from the December 19 closing price reversal top at 1.3308. Today’s action has helped form a minor bottom at 1.3158. A trade through 1.3253 will turn this bottom into a main bottom. If a main bottom is formed then a trade through it will turn the trend to down. Otherwise, the Euro is likely to push higher against the dollar, eventually resuming the uptrend on a breakout over 1.3308. 

Based on the near-term range of 1.3308 to 1.3158, a new retracement zone has formed at 1.3233 to 1.3251. Today’s high proved to be a successful test of the Fibonacci price level or upper end of this zone. If the short-term rally fails in this zone then this will be a potentially bearish sign. The formation of a secondary lower-top will be a clear sign that sentiment is shifting to the downside. 

Besides the retracement zone, Gann angle resistance at 1.3228, 1.3268 and 1.3288 could any rally today, but taking out these angles and closing above them will be strong signs that the buying is greater than the selling and that 1.3308 will eventually fail as a top. 

In summary, the main trend is up, but the EUR/USD could be setting up for a secondary lower-top. The failure to continue the current rally will suggest the market is poised for a break to 1.3092 over the near-term.