Euro (€) / US Dollar ($) (EUR/USD) Mid-Session Update for January 8, 2012

The EUR/USD is trading lower at the mid-session following an early session rally. The market is currently testing a short-term retracement zone and in a position to form a reversal top, indicating that there may be further downside action this week. 

Based on the break from the January 2 top at 1.3299 to the January 4 bottom at 1.2997, a key retracement zone was formed at 1.3148 to 1.3184. Today’s rally to 1.3139 came close to reaching this zone, but the failed rally could be construed as a sign that sellers came in early. 

Gann angle resistance from the 1.3299 top came in at 1.3139. This angle did stop the rally and could become significant resistance if the market works lower over the near-term. 

The first uptrending Gann angle to be tested is today is 1.3077. The EUR/USD did trade below this angle temporarily but could weaken into the close. Additional uptrending Gann angles from the 1.2997 bottom come in at 1.3037, 1.3017 and 1.3007. 

The key area to watch today is 1.3068 to 1.3051. This zone represents 50% to 61.8% of the short-term range defined as 1.2997 to 1.3139. Buyers may try to support the market in this zone so day-traders should watch for a possible technical bounce.