At the mid-session, the EUR/USD is trading inside of Friday’s expanded range. The lack of clarity and technically oversold conditions are keeping many traders on the sidelines. Some traders are paring their positions ahead of this week’s U.S. Federal Reserve Open Market Committee meeting which is supposed to reveal more clues as to if and when the central bank is likely to implement another round of quantitative easing.
Technically, the main trend is up. The nearest swing bottom is 1.2465. A trade through this level will turn the main trend to down. The market is also trading inside of a major retracement zone. This zone could become resistance if traders decide to pull the bids which are currently underpinning the market.
Based on the February 24 top at 1.3485 and the July 24 bottom at 1.2042, a major retracement zone has been formed at 1.2763 to 1.2934. On Friday, the EUR/USD crossed the lower or 50% level at 1.2763, but failed to attract strong buying. A break back under this level could be a sign of a short-term top. Sustaining the rally over this level could mean a test of the Fibonacci level at 1.2934.
Besides the horizontal resistance levels, the market is also testing a downtrending Gann angle at 1.2780. Based on the speed of this angle, it will cross the 50% level later this week, creating a significant resistance cluster. A close under both of these levels will be strong indications that a near-term corrective move is developing.
On the downside, an uptrending Gann angle from the 1.2042 bottom comes in at 1.2595 today. A break through this angle will be the first sign of weakness. This action could lead to a test of the main bottom at 1.2465. Not only will a move through this level change the trend to down, but it will signal a possible break to 1.2429.