Euro Closes above Retracement Zone; Sets Sights on 1.2453

The Euro continued to rally on Tuesday as short-traderscovered positions on the assumption that the Euro Zone economy may be stabilizingand the risk of a collapse in the currency is abating.

The Euro continued to rally on Tuesday as short-traderscovered positions on the assumption that the Euro Zone economy may be stabilizingand the risk of a collapse in the currency is abating.

Investor confidence in the global economic recoverycontinued to improve during today’s trading session, leading to an increase inrisk-based trading. The demand for greater risk encouraged traders to reverseso-called flight to safety positions in the U.S. Dollar.

Technical factors are also driving the Euro higher after theformation of a closing price reversal bottom last week. Now that this reversalhas been confirmed by this week’s follow-through rally, traders are becomingconfident that the current upside momentum may be strong enough to take out thelast main top at 1.2453. This action will turn the main trend up on the dailychart. The weekly chart indicates thatthis move may last 2 to 3 weeks with 1.2784 the minimum upside target.

Traders should not assume the market will rally without acorrection. The charts indicate that the bottom at 1.1876 has not been tested,meaning that a 50% or more correction to set up a secondary higher bottom isstill likely.

The GBP USD was able to recover from an early morningset-back triggered by not-so-friendly U.K. inflation data. The easing oftensions in the Euro Zone and greater demand for risky assets was the catalystbehind Tuesday’s turnabout.

The main trend turned up in the British Pound on Monday butthe rally has been labored because of 50% retracement resistance at 1.4810.This market slowly probed this price level late Tuesday but was unable totrigger stops or attract fresh buyers. Nonetheless, this price level remains animportant area to overcome. A sustained trader over 1.4810 tomorrow will set upthe Sterlingfor an acceleration to the next key retracement level at 1.4947.

Greater demand for higher yielding assets also helped drivethe Australian and New Zealand Dollars higher. The main trend is up on the AUDUSD daily chart. Technically, there is room to the upside with .8727 the firsttarget, followed by .8883. The NZD USDis currently the leader amongst the higher yielding currencies. The main trendturned up last week in the Kiwi on the move through .6899. Currently thismarket is trying to build strength at a 50% price level at .6942. The nextupside target is .7033. Look for the rally in the Pacific Rim currencies to continue as long as traders remain convincedthat the Euro Zone economy is stabilizing and the global economic recovery isback on track.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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