EUR/USD Mid-Session Analysis for December 7, 2012

After reaching its highest level in nearly 7-weeks on Wednesday, the EUR/USD formed a daily closing price reversal top, setting in motion the possibility of a 50% correction of its recent rally. The prediction of this break proved to be accurate this morning when the market traded through this level before reaching a short-term oversold condition. 

Based on the near-term range of 1.2660 to 1.3126, expectations were for a minimum 50% correction to 1.2893 over a 2 to 3 day period. This seemed like technicians were asking for a lot based on the initial price level, but volatility kicked in on Thursday to drive the Euro sharply lower versus the U.S. Dollar. 

Momentum continued early Friday, driving the market through the first target at 1.2893 and into 1.2877 where it found intraday support. Oversold conditions could prevail later in the session with the market retracing 50% of its daily range. This intraday target is 1.2924. 

The market is also following a steep downtrending Gann angle at 1.2966. Looking ahead, this angle is forecasting a possible move into the Fibonacci retracement level at 1.2838 early next week.