Euro Sells Off after Reaching Minor Retracement Zone

News fromthe European Central Bank that overnight lending at the 1.75% penalty ratespiked 15.8 billion ($21.4 billion), the highest since June 2009, pressured theEuros overnight. Reports circulating suggest that this spike may be related torenewed problems in the Euro-Zone periphery.

News fromthe European Central Bank that overnight lending at the 1.75% penalty ratespiked 15.8 billion ($21.4 billion), the highest since June 2009, pressured theEuros overnight. Reports circulating suggest that this spike may be related torenewed problems in the Euro-Zone periphery.

Technically,the sell-off corresponded with a test of the retracement zone of the 1.3744 to1.3428 range. This created resistance at 1.3586 to 1.3623. Based on the currentdaily swing chart formation, the top at 1.3609 could lead to a .0316 break to1.3293.

A break ofthis magnitude will not only reaffirm the main downtrend but also take out therecent swing bottom at 1.3428 and place the Euro squarely inside of the majorretracement zone at 1.3367 to 1.3250.

It’s justspeculation at this time, but there seems to be a trend developing thatsuggests the Euro may be headed lower. Speculators seem to feel this way,exiting positions overnight and putting some light pressure on the Euro.

Accordingto European Central Bank reports, banks borrowed 15.8 billion Euros onWednesday, up from 1.2 billion Euros on Tuesday and 1.1 billion Euros onMonday. Prior to the start of this week, overnight lending hadn’t topped 1billion Euros since early January. This action could be suggesting that thereis a problem developing and that the ECB needed to squash this before itfestered into something major.

The jump to15.8 billion Euros doesn’t have to mean that the ECB has a 15.8 billion Europroblem on its hand. It may just mean it wanted to make sure it has a cushionto deal with the issue succinctly rather than let is linger. Keep an eye on theborrowing the next few days to see if it begins to subside.

Other thanthe break from the retracement zone, Euro speculators aren’t sellingaggressively. However, it doesn’t look like there is a lot of buying interestat this time either.

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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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