Shorter-term, oversold conditions are likely to trigger ashort-covering rally especially since the Euro has reached theFibonacci retracment price at 1.2945 of the last rally.
The bigger picture indicates the lack of a unity in the European Central Bank regarding the next interest rate cut is hurting the Euro. Traders are selling the Euro as it has become unclear as to how much of a cut the ECB will take at its next meeting on May 7. Some policy makers prefer to slash rates to under 1% while others prefer to keep rates at 1%. Furthermore, there is no clear plan as to how to use non-standard means to stimulate the Euro Zone economy. Leadership from ECB President Trichet is being questioned and traders prefer the short side until all of the problems are addressed.
Shorter-term, oversold conditions are likely to trigger a short-covering rally especially since the Euro has reached the Fibonacci retracment price at 1.2945 of the last rally. Traders like to hide stops at or around this price which tends to generate two-sided trading at times. After a follow-through break to the downside, don’t be surprised with their is an acceleration to the upside if this price is regained.