Rumors that the European Central Bank will announce measures to battle the debt crisis in Spain and Italy spurred a turnaround in June Euro futures this morning. After reaching a low at 1.2358, the single currency is trading higher, putting it in a position to post a daily closing price reversal bottom if it can hold on to its gains. A closing price reversal at this time will not change the trend upward, but will likely trigger a short-covering rally.
Throughout the European debt crisis, the ECB has maintained the stance that it is not a lender of last resort while at the same time sticking to its mandate to provide price stability to the region. With conditions worsening in Spain and Italy, the central bank appears to be ready to provide more aggressive direct aid to these two countries. Short-traders who have dominated the Euro for most of the month, pared positions this morning as demand for higher-risk assets began to rise on speculation the ECB was poised to act quickly and decisively.
Technically, despite the rapid turnaround this morning, the June Euro is still battling resistance at 1.2407. If this downtrending Gann angle can be overtaken, traders should look for a test of another resistance angle at 1.2503.
If a closing price reversal bottom is formed, then traders should look for the start of a two-to-three day rally equal to at least 50% of the last break. Based on the short-term range of 1.2826 to 1.2358, a strong short-covering rally could trigger a move to 1.2592--1.2647 over the near-term. Since the main trend is down, short-sellers are likely to refresh their positions following a test of this potential resistance zone.
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Euro Futures Rebound On ECB Rumors
Published 05/31/2012, 08:27 AM
Updated 05/14/2017, 06:45 AM
Euro Futures Rebound On ECB Rumors
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