March Euro Finding Overnight Support

The March Euro FX futures contract found support overnight on an uptrending Gann angle at 1.3047. The actual low was 1.3038. Currently the market is hovering over 50 percent of the main range of 1.2637 to 1.3498 at 1.3068.

The 1.3068 to 1.3047 area is the key to the structure of chart. A break under the Gann angle is likely to trigger an acceleration to the downside with a Fibonacci retracement level at 1.2966 the next potential downside target.

Holding the support area could encourage short-covering or attract fresh buying since the main trend is up. In addition, time may become a factor since the market is down 13 days from the last swing top at 1.3498.

If traders do establish support then look for a possible closing price reversal bottom by the end of the day. The first upside target is the downtrending Gann angle from the 1.3498 top at 1.3238.

Fundamentally, the Euro has been trading weaker against the Dollar on the heels of an improving U.S. economy. Friday’s better-than-expected jobs data coupled with Tuesday’s strong retail sales had traders thinking that the Federal Reserve would rein in another round of quantitative easing for the time being.
On Tuesday, the U.S. Federal Reserve didn’t go as far as taking QE out of the equation, nor did it shorten the time its sees as the date easing ends, but it did acknowledge that the economy is growing albeit at a slow pace. Traders took the news in stride and rallied the dollar.

While the U.S. economy is improving, Europe is going through a relatively quiet time period, but this may be the calm before the storm. As sovereign debt turmoil as well as fresh austerity measures continue to take their toll on several Euro Zone economies, traders should look for the downward bias to continue until conditions improve. At this time, the U.S. economy is improving and Europe is being threatened with contraction. This should be enough to keep the Euro on the defensive. Over the short-run, however, oversold conditions may trigger a brief short-covering rally.