The EUR/USD broke out of a four-day range and is trading higher at the mid-session. The market is currently testing a minor 50% level at 1.2989 and a series of downtrending resistance angles at 1.2979, 1.2993 and 1.3011. Although the trade is firm, the market doesn’t seem to have the strength to take out the resistance. This could lead to an intraday retracement into the close.
Investors are reacting optimistically to the news that Cyprus may have made a deal with the European Union to avoid a financial crisis. This triggered today’s short-covering rally. The market could continue higher into the close if the deal is finalized. Stops could get hit above the resistance, triggering a surge into the Fibonacci level at 1.3023. A move through this level will likely mean a test of the last main top at 1.3134.
The main trend is still down. It will turn up on the daily chart following a breakout through 1.3134. Given the size of the support base, this could eventually trigger a rally into the major retracement zone at 1.3296 to 1.3394.
If a deal isn’t struck between Cyprus and the EU, then look for a sell-off into the close. Finishing under 1.2923 will be a sign of weakness and could set up a lower opening next week.
The main trend is up on the hourly chart. It turned up when the EUR/USD took out a series of tops at 1.2950, 1.2954 and 1.2977. An acceleration to the upside also took place when the market crossed a long-standing Gann angle from the 1.3106 top. This is setting up a possible rally into the next Gann angle resistance at 1.3030.
The main range is 1.3106 to 1.2843. This has created a retracement zone at 1.2975 to 1.3006. This morning’s rally fell short of the Fibonacci level at 1.3006 and the market fell back under the 50% level at 1.2975. This price is likely to act like a pivot price the rest of the day.
Holding above 1.2975 will be bullish, but a break below it could trigger a near-term move to 1.2941 – 1.2926.
Other than the mid-morning surge, it looks as if traders are willing to hold the market in a range. This is because they are waiting for news regarding Cyprus. The longer the market stays in a range, the greater the volatility.