EUR/USD Monthly Analysis for December 2012

After surviving a setback early in the month, the EUR/USD rebounded enough to close slightly better during November. Although the Forex pair had a lower-high and a lower-low during the month, it closed within striking distance of the October high at 1.3139 and the November high at 1.3172. 

The Gann angle which helped stabilize the market at 1.2660 in November moves up to 1.2842 in December. This angle should be considered support, however a break through it will mean that sentiment is shifting to the downside. 

A breakout through the October high at 1.3712 is likely to trigger an acceleration into a downtrending Gann angle from the 1.4940 top at 1.3420 this month. 

The short-term range is 1.2042 to 1.3172. The retracement zone created by this range is 1.2607 to 1.2474. If the Gann angle at 1.2842 fails to hold then look for a test of this zone. 

The long-term range is 1.4940 to 1.2042. This range has formed a retracement zone at 1.3491 to 1.3833. This zone is a potential upside target if the downtrending Gann angle at 1.3420 is violated. 

With the EUR/USD surrounded by 50% levels at 1.2607 and 1.3491, the market could trade in a range unless one of these levels is violated. An even tighter possible range is 1.3172 to 1.2607. 

Fundamentally, the EUR/USD is likely to be most influenced by U.S.fiscal cliff news. With the deadline rapidly approaching, a failure by U.S. officials to reach a compromise regarding tax hikes and lower spending, should put selling pressure on the Forex pair. If a timely decision is reached, the Euro should rally against the dollar.