Rumors that the European Central Bank would announce measures to battle the debt crisis in Spain and Italy spurred a turnaround in June Euro futures this morning. After reaching a low at 1.2358, the single currency is trading higher, putting it in a position to post a daily closing price reversal bottom if it can hold on to its gains. A closing price reversal at this time will not change the trend to up, but will likely trigger initially a short-covering rally.

Throughout the European debt crisis, the ECB has maintained the stance that it is not a lender of last resort while at the same time sticking to its mandate to provide price stability to the region. With conditions worsening in Spain and Italy, the central bank appears to be ready to provide more aggressive direct aid to these two countries. Short-traders who have dominated the Euro for almost the entire month, pared positions this morning as demand for higher risk assets began to rise on speculation the ECB was poised to act quickly and decisively.

June Euro Futures Gann Analysis Chart

Technically, despite the rapid turnaround this morning, the June Euro is still battling resistance at 1.2407. If this downtrending Gann angle can be overtaken, then traders should look for a test of another resistance angle at 1.2503.

If a closing price reversal bottom is formed, then traders should look for the start of a 2 to 3 day rally equal to at least 50% of the last break. Based on the short-term range of 1.2826 to 1.2358, a strong short-covering rally could trigger a move to 1.2592 – 1.2647 over the near-term. Since the main trend is down, short-sellers are likely to refresh their positions following a test of this potential resistance zone.

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Barring a massive buying spree or short-covering rally, the Nearby Euro futures contract is expected to finish the week sharply lower and in a position to continue its sell-off next week.

This week, the single currency took out the January bottom at 1.2637 to post a new low for the year. Additionally, the market also spent a little time below the August 2010 bottom at 1.2535. This price is expected to be defended heavily since the next downside target is the June 2010 major bottom at 1.1832.

There are no significant Gann angles providing support at this time, however, the Euro is walking down a downtrending Gann angle from the 1.4908 top at 1.2708. This price is essentially resistance; however, it may act as a pivot price from time to time.

The main trend is down on the weekly chart as demonstrated by the series of lower-tops and lower-bottoms. The main trend will not turn up unless the main top at 1.3287 is violated. Because of severely oversold conditions, the Euro is ripe for a daily or weekly closing price reversal bottom. Although this chart pattern will not turn the main trend to up, it can trigger the start of a significant short-covering rally.

A significant amount of speculators likely went short after 1.3000 was violated. These traders currently have a significant amount of open position profit. The longer the Euro hovers around the old bottom at 1.2535, the more nervous these short-traders will become. This is the area at which a short-covering rally may begin.

Although a new shorting opportunity may emerge if 1.2535 is violated with conviction, short-traders have to avoid getting caught in a bear trap. It is better to take the quick exit if wrong than to hold on while the market goes through a retracement.

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The U.S. Dollar Index is finishing May in a strong position. The renewed European sovereign debt crisis helped give the Greenback a boost as traders fled higher risk assets for the safety of the lower-yielding dollar. This week the focus turned to Japan as the Yen fell against the U.S. Dollar after Fitch Ratings cut Japan’s sovereign debt rating to A+ from AA.

These fundamental events have helped the U.S. Dollar retrace better than 50% of its break from June 2010 to May 2011 while putting it in a position to challenge the key 61.8% retracement level. Besides these percentage retracement levels, the Index is also in a position to take out the high for the year at 81.78. Finally, continued strength has also put the Index in a position to cross over to the bullish side of a long-standing Gann angle.

The first area of interest to look at is the simplest. This is the monthly U.S. Dollar percentage retracement zone (Figure 1). Based on the main range created by the June 2010 top at 88.71 and the May 2011 bottom at 72.70, a 50 to 61.8 retracement zone has been created at 80.71 to 82.59.

As you can see that starting in November 2011, the 50% price level has been tested several times. In December 2011 it was actually penetrated with the move stopping at 81.78. Currently, the Index is trading on the bullish side of the 50% price level. What is most important, however, is that unless the dollar weakens significantly over the next seven trading sessions, it is going to close over the 50% level. This will put the Index in a position to trade higher in June.

While crossing to the bullish side of the 50% price is a sign of strength, establishing support at this price level is even more important. If traders can support the Index at 80.71, then this may propel the market into the Fibonacci level at 82.59. This may prove to be resistance on the first test of this key level, but a breakout over it is likely to lead to an acceleration to the upside.

The next important chart to watch is the monthly U.S. Dollar Index Swing Chart (Figure 2). The simple definition of an uptrend is higher-tops and higher-bottoms. This chart clearly shows the formation of higher bottoms at 78.10 and 78.60.

This month’s strong rally has put the market in a position to breakout above the key swing top at 81.78. A move through this level could launch a strong move to the upside. Once the trend turns up, traders will have to defend the swing bottoms or the trend will turn back down.

The last chart to watch is the monthly U.S. Dollar Gann Angle Chart (Figure 3). This chart follows the price and time movement of the market. Since bottoming in May 2011 at 72.70, the Index has following a pair of uptrending Gann angles. During May, one of these angles provided support at 78.70. The other has moved up to 84.70.

Besides the uptrending Gann angles, the downtrending Gann angle from the 88.71 top could become significant during the last week of the month. This angle drops in at 82.96 in May. Like the horizontal percentage retracement levels, this angle may act as resistance point on the initial test, but as a pivot if it is violated. A breakout through this angle coupled with momentum could drive the Index to the next downtrending Gann Angle at 85.84, but this is more likely in the months to follow if the trend remains up.

As we end the month of May, all signs point toward a strong start for the U.S. Dollar in June. There may be a few speed bumps encountered along the way, but as long as the Index continues to post higher-tops and higher-bottoms, the bias will be to the upside.

The June Euro futures contract confirmed last Friday’s closing price reversal bottom with a rally through 1.2796 on Monday. Although this chart pattern could lead to a sizeable short-covering rally, traders should note that the main trend is still down and that the Euro is still susceptible to shorting pressure.

On May 18, the June Euro found support after reaching a new low for the year at 1.2644. The previous bottom was reached at 1.2645 on January 13. Typically, a closing price reversal bottom triggers a two to three day rally equal to at least 50% of the last break.

Based on the last break from 1.3287 to 1.2644, a retracement zone has been created at 1.2966 to 1.3041. A two to three day rally could mean a test of the 50% level at 1.2966 on Tuesday, May 22 or Wednesday, May 23.

Besides forming the closing price reversal bottom, the June Euro has also crossed to the bullish side of a downtrending Gann angle from the 1.3287 top at 1.2727 today. According to the Rule of All Angles, holding above the steep downtrending angle is likely to trigger a rally to the next downtrending angle at 1.3007 today.

This angle declines to 1.2967 on May 23. This means it will cross the 50% retracement level at 1.2966. This creates a potential resistance cluster at 1.2966 to 1.2967 on May 23, making this our best upside target for the week.

In order to square price and time precisely, the June Euro futures contract is going to have to rally sharply higher over the next two to three days. Unexpected news is usually the reason for a rally of this magnitude. Traders should watch the news carefully to avoid getting caught on the wrong side of a major short-covering rally.

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The Weekly British Pound/U.S. Dollar, symbol GBP USD, collapsed through an uptrending support line and a key 50% level, triggering a sharp break to the downside. To technical traders, the sell-off did not come as a surprise since the currency pair formed a potentially bearish closing price reversal top at 1.6301 two weeks ago.

Now that uptrending Gann angle support from the 1.5233 bottom has been penetrated at 1.5953, the market is likely to test the next uptrending Gann angle at 1.5593 this week. Next week it moves up to 1.5613 and nearly crosses a 61.8% level at 1.5641, making it a loose support cluster.

Although the momentum is to the downside at this time, the main trend is up until 1.5602 is broken. This may mean that buyers will be waiting to step in near 1.5641 to 1.5613 next week. On the upside, the GBP USD is walking down a steep Gann angle at 1.6141. This is the best resistance. This Gann angle drops to 1.6061 next week.

In summary, next week’s expected range is 1.5613 to 1.6061 based on the Gann angles and 1.5641 to 1.6089 based on the Fibonacci price levels. If volatility falls, the British Pound may even ping-pong between a pair of 50% price levels at 1.5767 to 1.5925.

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This week the U.S. Dollar/Canadian Dollar, symbol USD CAD, broke out to the upside of a downtrending Gann angle from the October 2011 main top at 1.0657. The breakout triggered an acceleration to the upside, setting up a potential short-term rally into a key retracement zone.

Let’s look at the technical breakdown, starting with the important ranges. The main range is .9406 to 1.0657 with a retracement zone at 1.0032 to .9884. This area was tested for a prolonged period as prices consolidated before the breakout. The short-term range is 1.0657 to .9799. This range has formed a retracement zone at 1.0223 to 1.0329. If the upside momentum continues then this is the next potential target zone.

In addition to the upside breakout through a 50% price level at 1.0032, the USD CAD also crossed over to the bullish side of a downtrending Gann angle at 1.0017. If the Rule of All Angles holds true then the next target is the flatter downtrending Gann angle at 1.0337. A strong rally could lead the market to test a resistance cluster at 1.0329 to 1.0337 (Red Arrow).

Now that the main trend is up, the market may begin to walk up an uptrending Gann angle at .9919 this week (Blue Arrow).

In summary, the fundamentals are clearly on the side of the U.S. Dollar. This is giving investors the clarity and conviction to trade aggressively the long side of the USD CAD currency pair.

This week’s breakout over a previous resistance angle set a bullish tone for the week. The next upside target is 1.0329 to 1.0337. Although the definition of an uptrend is higher-tops and higher-bottoms, an uptrending Gann angle at .9919 should act as a strong support guide.

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The June Euro continued its sell-off overnight, but as it neared the low for the year at 1.2645, the market reversed course and is now trading higher. Since the current break is a clear definition of prolonged move down in terms o price and time, the single-currency is ripe for a closing price reversal bottom.

A closing price reversal bottom is not a change in trend, but often produces a 2 to 3 day counter-trend rally sometimes equal to 50% of the last break. This is where it gets interesting since the current break is 1.3287 to 1.2683. A 50% correction of this range would mean a test of 1.2985. Since the old bottom at 1.3000 is likely to be the next resistance, 1.2985 to 1.3000 could be a strong resistance cluster.

Before we can even think about a rally back to near the 1.3000 level, the market will have to form the closing price reversal and confirm it. In addition, the Euro will have to take out the downtrending Gann angle that has guided this market lower for the past 11 trading sessions. This resistance angle is at 1.2847 today.

If anything, a closing price reversal could trigger a 2 to 3 day short-covering rally, but reaching the 50% level at 1.2985 seems pretty remote. Even if there is a rally, it is going to take a lot of effort to change the main trend back to up. With the fundamentals on the side of the short-seller, any rally that takes place without a supporting story is likely to be met by stiff resistance.

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Early in the trading session on Tuesday, the June Australian Dollar was making an effort to form a bottom. Not only was it attempting to crossover to the bullish side of a downtrending Gann angle and regain a Fibonacci retracement level, but it was also attempting to form a closing price reversal bottom.

All of these scenarios were negated when the market turned south late in the trading session, falling below the angle and retracement level as well as erasing all possibilities of a closing price reversal bottom.

With the downtrend firmly intact, the June Australian Dollar is likely to continue to break until it reaches the main bottom from December 14 at .9716. The downtrending Gann angle that the market has been walking down since topping on April 27 at 1.0422 is at .9902 today. This angle, dropping .004 per day should continue to be resistance as well as a guide to lower prices. Crossing to the bullish side of this angle will be a sign of a short-term bottom, but not a change in trend.

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The June Australian Dollar futures contract is showing signs of bottoming this morning after regaining a key retracement level and crossing to the bullish side of a steep downtrending Gann angle from the April 27 top at 1.0422.

The main range the currency appears to be adhering to is the November 23 bottom at .9496 to the February 29 top at 1.0720. This range has created a retracement zone at 1.0108 to .9964. Value traders often begin to surface inside of the 50% to 61.8% retracement zone when the trend is up, but this time, they may be attracted to it because of oversold conditions. In addition, since the market has been down 12 days from the 1.0422 top, it may have just run out of sellers.

Overnight the June Australian Dollar reached a low of .9910. The subsequent intraday short-covering rally has put the market in a position to post a daily closing price reversal bottom if it can stay positive into the close. This pattern is not indicating a change in trend, but is a sign that the buying may be greater than the selling at current price levels.

Besides the testing of the Fibonacci level at .9964 and the formation of a possible closing price reversal bottom, the June Australian Dollar has also passed to the bullish side of a downtrending Gann angle at .9942. A close over this angle will be a sign that the market is setting up for a strong retracement of the most recent break. Given the short-term range of 1.0422 to .9910, we could be looking at a near-term retracement to 1.0166 before the downtrend resumes.

If this currency is going to retracement to 1.0166 then the fundamentals are going to have to change dramatically. European sovereign debt fears and a general dislike for higher –yielding assets are just two reasons why the Aussie should remain under pressure. Additionally, the recent 50 basis point slash of its benchmark interest rate by the Reserve Bank of Australia is the move which started the decline and the main reason why this currency is likely to remain under pressure.

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The bottom is falling out of July Silver this morning as Greece struggles to form a coalition government. Worries about the impact of political turmoil in Greece and renewed sovereign debt fears in the Euro Zone are pressuring demand for precious metals.

Technically the market is pulling away from a downtrending Gann angle that has acted as its guide since July Silver topped at $37.60 on February 29. Today the angle drops down to $29.76. Additional Gann angle resistance from the $31.47 top is at $30.19 today.

Prior to this current break, the market dropped from $33.36 to $29.99. This $3.37 decline took place over 15 market days. A $3.37 break from the recent top at $31.47 targets $28.10 on May 18. With the market currently trading at $28.85, price is clearly ahead of time.

With July Silver trading on the bearish side of a major retracement zone and a pair of downtrending Gann angles, it appears to be setting up for a test of the December 29 bottom at $26.50. If it continues to walk down the main Gann angle from the $37.60 top then look for a test of $26.50 on June 6.

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Investors continued to dump risky assets overnight, driving the June Australian Dollar futures contract through a slow-moving uptrending Gann angle from the .9496 main bottom at 1.0066.

Since topping out at 1.0422 on April 27, the contract has fallen sharply. The initial break was triggered by the surprise 50 basis point cut by the Reserve Bank of Australia, but the subsequent weakness has been fueled by European sovereign debt fears. Currently, the contract is walking down a steep downtrending Gann angle at 1.0102. This price is today’s resistance.

Based on the main range of .9496 to 1.0720, a major retracement zone has been formed at 1.0108 to .9964. At this time the market is trading on the weakside of the 50% percent level, but slightly above the Fibonacci level which is today’s likely downside target if the market continues to sell-off.

Cleary the main trend is down on the daily chart. If the daily June Australian Dollar continues to follow the downtrending Gann angle at a rate of .004 per day then look for a test of the slow-moving uptrending Gann angle at .9799 to .9801 on May 18 or May 21.

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After briefly exploring the bearish side of 1.3000 on Monday, the June Euro turned around to close near the high of the day. Although this move had the appearance of a daily closing price reversal, it actually didn’t indicate anything other than short-term oversold conditions and a successful defense of the psychological 1.3000 price level.

Monday’s rally was impressive but when it came to following-through to the upside, this morning’s weakness is strong evidence that the Euro is still in the hands of the short-sellers. The short-term picture shows that the market isn’t even strong enough to fill the Friday to Monday gap at 1.3082 to 1.3068. The bigger picture shows a market that is testing the bottom end of a major retracement zone at 1.2969 and a top at 1.3070. The longer the Euro spends inside of this zone the greater the likelihood of a volatile breakout.

Besides the 50% level at 1.3070, the downtrending angle from the 1.3287 top is providing resistance at 1.3087. While not actually being touched to confirm it as a resistance angle, its presence is likely to act as a guide to the downside. Additionally, crossing to the weakside of a slow-moving uptrending Gann angle at 1.3045 is also an indication of dominant selling pressure.

Once again short-traders appear to have the power behind them to drive through the key 1.3000 level. Perhaps this time because of last night’s failed follow-through rally, buyers will be willing to give up their defense of this level, allowing the Euro to seek a new value area.

Fundamentally, with negative news from Europe beginning to pile up, it is hard to be anything but bearish. Two key issues pressuring the Euro are worries that a new government in Greece will speed up its move to withdraw from the Euro Zone and the possibility of a strained relationship between France and Germany. On a positive note, rumors that Spain may be engaging in talks to create a domestic bank-recapitalization program could underpin the Euro or at least slowdown the rate of its decline.

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July Silver is trading lower this morning due to the higher U.S. Dollar. However, the market is trading inside of Friday’s range of $30.48 to $29.78. This is indicative of trader indecision.

On the bearish side of the coin, silver continues to straddle a downtrending Gann angle dropping .16 per day at $30.08 today. In addition, July Silver is trading on the weakside of a major retracement zone at $32.05 to $30.74. Finally, late last week the market reaffirmed its downtrend with a break through its last main bottom at $29.99.

Trend traders are correct to be bearish since the market is making lower-tops and lower-bottoms. However, last week the trading action was able to move the new swing top down from $33.36 to $31.47, bringing the silver market closer to its breakout level. Most of all, the market formed a closing price reversal bottom at $29.78. This formation often indicates that the buying is greater than the selling at current price levels. The key is the follow-through rally which will confirm the formation.

Today, traders should watch for a rally through $30.48 to confirm the bottom at $29.78. While this will not be a change in trend, it will indicate that shorts are lightening up their positions and perhaps a few buyers are willing to pay up. Typically, the first target of a closing price reversal bottom is 50% of the last rally. This means that $30.63 will be a key pivot price. In addition, the old Fibonacci retracement level at $30.74 is another level that must be overcome to attract more buying.

So while on one hand July Silver is trading in a downtrend, there is a case building for a potential turnaround. The set-up is there for the start of a strong rally, but the market needs a catalyst to fuel the move.

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The June Euro briefly broke through three bottoms on the daily chart at 1.3000, 1.3009 and 1.2987 last night, but failed to trigger the wave of sharp selling pressure that many had anticipated when the key 1.3000 psychological level was violated.

Short-term oversold conditions were probably the main reason for the failure since the Euro has been dropping at a rate of .008 per day since topping at 1.3287. In addition, the main range is 1.2645 to 1.3494. This range created a major support zone at 1.3070 to 1.2969. Both the downtrending Gann angle at 1.2967 and the Fibonacci level at 1.2969 factored favorably in the Euro’s early morning turnaround.

On the upside, the 50% price level at 1.3070 is likely to be resistance today. This is followed by downtrending resistance at 1.3127. Since the main trend is down, both level are likely to attract fresh selling pressure if tested.

With sentiment shifting to the downside, it seems like it is only a matter of time before the support near 1.3000 fails. Once bearish shorts can gain control of the Euro and push it through support then this price is likely to become new support. The charts indicate that there is room to the downside with an uptrending Gann angle at 1.3040 the next likely downside target.

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The EUR USD took out its most recent swing bottom at 1.2994, reaffirming the downtrend and setting up the market for a potential wash-out to the downside. For weeks, traders have been eying 1.3000 as a major support area. Over the past month this area has been violated twice without much fanfare. Now that sentiment appears to be shifting to the downside, the selling pressure at this price level may be too much to withstand.

Technically, the main range is 1.2623 to 1.3485. This range has created a retracement zone at 1.3054 to 1.2953. Overnight, traders pushed the market through 1.3000, but the 61.8% level at 1.2953 proved to be strong support. If intraday short-covering does prevail, then look for a rally back to the 50% level at 1.0354.

Uptrending Gann angle support from the 1.2623 bottom is at 1.2963 this week. This angle combined with the 61.8% level forms a support cluster at 1.2963 to 1.2953. This key area was tested overnight, attracting profit-taking and fueling a short-covering rally.

Traders should watch this support cluster all week because it is the area to overcome in order to trigger the washout to the downside. Once this zone is cleared, short-sellers should pile on the Euro triggering a possible break into the next uptrending Gann angle at 1.2793. In addition, old support should become new resistance.

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The weekly USD CAD posted a bull-flip chart pattern last week, closing higher and reversing the weak close from the previous week. This pattern was confirmed overnight when the currency pair followed-through to the upside.

In addition, the weekly USD CAD has also formed a triangle chart pattern. The triangle chart pattern is a non-trending pattern which often indicates impending volatility. The likelihood of a volatile breakout increases as the market approaches the apex of the triangle formed by the compression of the support and resistance lines. The actual apex falls near .9884 during the last week in June and the first week in July, but the trading action suggests that traders may not wait that long before breaking out.

The main trend is down on the weekly chart because of the clearly defined lower-tops and lower-bottoms. The main trend will turn up when 1.0052 is taken out. The main range is .9406 to 1.0657. This range has created a retracement zone at 1.0032 to .9884. This zone has been holding the market in a tight range since late January. Like the triangle chart pattern, the longer the USD CAD stays bottled-up inside of this zone, the greater the likelihood of a volatile breakout.

The combination of a downtrending Gann angle and an uptrending Gann angle forms the triangle chart pattern. This week, downtrending resistance is at 1.0037 while uptrending support is at .9816. Since the downtrending Gann angle crosses the 50% retracement level in close proximity, a resistance cluster has formed at 1.0032 to 1.0037. Traders have to watch this resistance cluster carefully. The first test of this cluster is likely to attract selling, but if upside momentum is strong then it should overcome the resistance and trigger an upside breakout.

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After trading sideways for several months, the Euro is showing signs of life versus the New Zealand Dollar. On Thursday, the EUR NZD crossed the March 22 high at 1.6396, triggering a mild breakout to the upside. If traders can recognize this move then volume and volatility should increase, putting this currency on a path to reach an upside target on May 21.

Besides the breakout to the upside, the EUR NZD has also crossed to the bullish side of an uptrending Gann angle at 1.6414 today. Walking along this angle over the next two weeks will take this market to 1.6854. A downtrending resistance angle from the November 22 top at 1.8132 comes in at 1.6852 on May 21. Finally, the main range is 1.8132 to 1.5588. The 50 percent level of this range is at 1.6860.

The combination of the Gann angles and the retracement level creates a price target and potential resistance cluster at 1.6852 to 1.6860 on May 21. The best way to play for this move is to watch how the market reacts to the uptrending Gann angle. This angle should act as a guide and may not necessarily be support all the time.

Despite the weakness in the Euro against the U.S. Dollar this week, the Euro has held its ground against the New Zealand Dollar. Fundamentally, the New Zealand Dollar broke sharply after a report showed the country’s jobless rate unexpectedly rose. This report may lead the Reserve Bank of New Zealand to ease monetary policy. This led traders to increase the probability of a rate reduction by September to more than 60 percent from less than 50 percent according to Bloomberg.

On Thursday, the European Central Bank left its benchmark interest rate unchanged and offered no hints as to whether it is even considering further cuts. Since the RBNZ may lower its key interest rate in the future, the interest rate differential favors the Euro.

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Earlier in the week I asked the question “Did Silver Bottom Last Week?” Although I wasn’t outright bullish, I did mention that July Silver crossed to the bullish side of a downtrending Gann angle inside of a major retracement zone, a pattern that often leads to the start of a strong rally. I also noted that the main trend wouldn’t turn up on the daily chart until the main top at $31.47 was violated. Since it was a long way from the price action, I thought that a small “W’ pattern would form and thus create a lower breakout level.

Well, since the last main bottom at $29.99 was violated this week, the trend is still down. In addition, the market is now trading below the retracement zone and on the bearish side of a downtrending Gann angle at $30.24 today. If there is a silver lining (excuse the pun), a new swing top and potential change in trend level has moved down to $31.47.

Look for prices to continue to drift lower as it straddles the downtrending Gann angle moving at a pace of .16 per day. Closing over this angle will be a sign that a bottom may be forming, but the market will then have to regain the Fibonacci level at $30.74 to actually show strength. Even if the market stops making new lows, it still has to form a support base in order to attract new buyers. If this occurs then maybe it will build enough momentum to fuel a breakout through $31.47 and change the trend to up.

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It looks as if the Monthly Nearby U.S. Dollar Index is trying to establish support at 50 percent of the May 2011 to January 2012 range. Based on the range of 74.605 to 82.470, this market has tested successfully the 50 percent price level at 78.538 several times since it was formed. The recent test on May 1 at 78.665 could prove to be most important if the market can take out the April high at 80.38.

In order for the U.S. Dollar Index to rally, several currency futures markets have to weaken. One of these markets is the Nearby Monthly Swiss Franc. Based on the longer-term range of .8618 to 1.4216, a retracement zone has been established at 1.1417 to 1.0756. After bottoming at 1.0441 in January, this futures contract quickly rallied to 1.1210, establishing its 2012 trading range.

Since February, this market has found support at the lower or Fibonacci retracement level of this trading range at 1.0756. A failure to hold this price level could encourage additional selling pressure that may trigger a break into the low for the year at 1.0441. This action would help drive up the U.S. Dollar Index.

A break below key support in the Nearby Monthly Euro futures market will also trigger an upside response in the U.S. Dollar Index. This futures contract bottomed at 1.2637 in January and topped in February at 1.3498. Since then it has traded inside of a range while straddling a 50 percent price level at 1.3068. Holding this price is giving the Euro a slight upside bias, but a break under it would be a sign a weakness.

The first downside target is the cluster of Gann angles and the Fibonacci level. The combination of the horizontal price level at 1.2966 and the uptrending Gann angle at 1.2957 may prove to be either an important support zone or a breakout point.

With key support established near the 1.3000 level, a break through this price will likely mean a major shift in investor sentiment. This could trigger a further decline into 1.2966 to 1.2957. If this price area fails then traders should look for an acceleration to the downside. This action should trigger a quick rally in the U.S. Dollar Index.

Since it is early in the month, traders have plenty of time to monitor both the Swiss Franc and Euro to see if the scenarios described develop. Traders should overlay these key monthly levels on the daily chart to see how they interact with the short-term time frame. It is easy to get caught spending too much time trying to figure out the shorter-term price moves when it is actually the longer-term chart dictating the support and resistance and changes in trend.

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The June Euro is trading inside of Wednesday’s range as traders await today’s European Central Bank interest rate announcement and ECB President Draghi’s press conference. Expectations are for the central bank to leave interest rates unchanged this time, but leave the door open for further cuts later in the year should the Euro Zone economy continue to weaken. Draghi may talk about the possibility of increasing its bond buying campaign in Spain. Traders are likely to react to his comments which should lead to periodic volatility early in the U.S. session.

Technically, the June Euro futures contract is currently trading inside of the retracement zone created by the recent range of 1.3000 to 1.3287. This possible support area is 1.3143 to 1.3110. Additionally, the Euro tested and found support overnight on an uptrending Gann angle at 1.3130.

If traders interpret ECB President Draghi’s comments as bearish, then look for an immediate test of 1.3110. A failure to hold this level should trigger an acceleration down to the uptrending Gann angle at 1.3065. Holding the steeper Gann angle and the retracement zone could trigger a short-covering rally. There is plenty of room to the upside with downtrending Gann angle resistance coming in at 1.3249. The market is not likely to rally straight up to that area since a minor retracement zone at 1.3206 to 1.3225 has to be overcome first.

The June Euro is trading inside of a tricky price zone. Since the main trend is up on the daily chart, there is still a slight bias to the upside especially since the market is holding inside of the retracement zone. Traders should watch the volume and price action carefully because this type of set up can create a bear trap. If the market begins to break sharply, try to determine whether it is being triggered by heavy selling pressure or bids being pulled. Falling bids can sometimes create the trap that catches a trader selling weakness while chasing the bid.

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Tuesday’s closing price reversal top in the Daily June Euro was a sign that the sellers finally took control of the single currency and that buyers were most likely ready to abandon the upside. Wednesday’s volatile sell-off did not come as a surprise since price and time analysis earlier in the week almost pinpointed when and where the market was going to breakout although I was still not sure of the direction.

Early during Wednesday’s session, not only did the Euro trade to the bearish side of a major 50% price level at 1.3247, but it also took out uptrending Gann angle support at 1.3200. Once this area was violated, the market was free to trade through Tuesday’s low at 1.3207.

The short-term range of 1.3000 to 1.3287 created a retracement zone at 1.3144 to 1.3110. This area was successfully tested on Wednesday. Additional support was provided by the uptrending Gann angle at 1.3120. Since the main trend is up, this may be a buying zone for some, but because of the fast break, any “technical bounce” in this area is likely to be caused by profit-taking and short-covering ahead of Thursday’s European Central Bank meeting.

Fundamentally, the June Euro futures contract plummeted after reports said manufacturing slumped and unemployment rose to match a record high in March. German Bund futures soared to a record high of 141.69, reflecting investor concern that the slowdown would continue to sweep the Euro Zone and hit major economic centers such as France and Germany.

Economic downturns in Italy and Spain continued to send worries throughout the region while week-end elections in Greece and France created additional turmoil that weighed on the minds of traders. Investors now fear that plethora of negative news will drive the Euro through the key 1.3000 area, perhaps setting off a string of orders that could trigger an acceleration to the downside.

On Thursday the European Central Bank will meet amid growing pressure that the central bank will be forced to use bond buying as a measure to protect the Euro nation from additional economic weakness. Talk is circulating that the ECB may even consider cutting its benchmark interest rate soon. This action would weaken the Euro further as it would remove the region’s interest rate differential advantage. Even if the central bank leaves interest rates unchanged, ECB President Draghi’s post-meeting news conference will be watched carefully for signs of additional decisive actions.

Since the Euro stopped inside of a major retracement zone at 1.3144 to 1.3110, it is possible we could see a technical bounce back up to 1.3206 – 1.3225. Bearish traders will try to form a secondary lower top in this zone to set up the next down draft while bullish traders will try to push the market higher in an attempt to regain the recently lost ground. The direction is likely to be determined by the actions of the European Central Bank and President Draghi on Thursday.

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The EUR USD reached the apex of a triangle formation and plunged to the downside. The triangle chart pattern is a non-trending pattern and often indicates impending volatility especially as it nears the apex of the pattern. This pattern didn’t disappoint as bids were pulled under support and the market broke sharply.

Solid downtrending Gann angle resistance handled every attempt to breakout to the upside this week, causing bullish traders to give up, exposing the market to heavy selling pressure. Once the last breakout attempt failed on Tuesday and the market made a closing price reversal top, all that was left to hold the Euro was an uptrending Gann angle at 1.3234.

Once the bids were pulled and the sellers took control, the daily chart pattern indicated that there was nothing to stop the break until it reached a retracement zone or another uptrending Gann angle. Based on the short-term range of 1.2994 to 1.3283, a retracement zone was created at 1.3138 to 1.3104. The upper target or 50% level was tested this morning, producing a technical bounce, but nothing to indicate major buying was taking place. In fact, it appeared to be more of a profit-taking bounce rather than fresh buying.

Further downside pressure today could trigger a test of the uptrending Gann angle at 1.3114 or the Fibonacci price level at 1.31043. Since the main trend is up on the daily chart, a bottom could form in this area, but it would be better if a support base formed first since the height of the rally is often equal to the length of the base. A spike bottom tends to be met with renewed selling pressure after a short retracement to the upside.

If you missed the move, be patient for the next one to develop. Watch the trading action inside of the retracement zone for a large bid to appear. If big money likes this zone then they will provide the support for the next rally.

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The cluster of downtrending Gann angles at 1.3264, 1.3271 and 1.3287 once again proved to be too much resistance for the Daily June Euro futures contract overnight. In addition, the single currency failed to take out last week’s high at 1.3273.

Besides the Gann angle resistance, the June Euro also met opposition inside of a major resistance zone. After briefly touching 1.3269 early in the trading session, the market is now trading below the 50% level at 1.3247.

If downside pressure continues, the Euro should test uptrending Gann angle support at 1.3200. This angle has held on a closing basis since the market bottomed at 1.3000 ten days ago. A close below this angle on Monday could trigger a break to 1.3137 over the near-term.

The combination of the downtrending and uptrending Gann angles has formed a triangle chart pattern. The triangle chart pattern is a non-trending pattern because it compresses prices into a sideways or rangebound trade. This, however, is often indicative of impending volatility. “X” marks the spot where the Gann angles and the 50% level converge on May 2 and May 3. This area is going to “make it or break it”.

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July Silver crossed to the bullish side of a downtrending Gann angle late last week, setting up the market for a potential rally. In addition, it has regained a key retracement level, indicating a possible shift in investor sentiment. Because of this activity, July Silver futures is a market to watch.

The main range is 26.50 to 37.60 with a key retracement zone at 32.05 to 30.74. The downtrending Gann angle from the 37.60 top is at 30.72 today. Crossing the Gann angle and regaining the 61.8% level are strong signs that shorts may be weakening and that the buying is getting stronger. Its current price level may be attractive to value-based traders, but trend traders may have to wait a little longer before getting upside confirmation.

The daily main trend is down. It will change up when the swing top at 33.36 is crossed. Although that price is a long way off, the market could form a small “W” this week which will lower the swing chart breakout price. The development of the next rally may require a little more patience, but it could be worth it if the market reaches its upside objectives. Those will be posted later in the week.

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Apple Inc., stock symbol AAPL, had a volatile week. The week began with the stock getting hit with tremendous selling pressure which drove the market through a retracement zone at $580.11 to $565.03 before reaching its low for the week at $555.00. The stock followed a Gann angle moving down $8.00 per day from the April 10 top at $644.00.

On Wednesday, April 25, Apple gapped sharply higher after releasing bullish earnings news the night before. The stalled at $618.00 after breaking through a retracement zone created by the $644.00 to $555.00 range at $599.50 to $610.00.

The huge one day rise in price increased volatility, but also made the stock relatively expensive, setting it up for a possible retracement of the rally from $555.00 to $618.00. Price and Time analysis suggested the first downside target would be the $603.00 to $599.50 support cluster. This area was reached on Friday, April 27.

The chart suggests that Apple should continue to see selling pressure on Monday, April 30 before it reaches a potential value area. An uptrending Gann angle from $555.00 has identified $587.00 as one target price. Additionally, a 50% correction of the $555.00 to $618.00 range is $586.50. This makes $587.00 to $586.50 an important price cluster on Monday.

Traders who couldn’t buy the bottom and didn’t want to chase the top are likely to begin buying following a test of this support cluster. If the market holds then Apple may form a secondary higher bottom which could lead to another rally and a possible test of the all-time high at $644.00.

If buyers fail to show up on this anticipated break then it looks as if a secondary lower-top has formed at $618.00. This could mean a challenge of $555.00 over the near-term and the possibility of lower prices from there.

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The overnight move by the Bank of Japan to stimulate its economy by putting liquidity in and taking liquidity out, failed to fool traders and effectively looked like a weak attempt by the central bank to pull a slight of hand trick on investors.

Initially, June Japanese Yen investors sold the currency after the Bank of Japan announced more monetary easing measures. On Friday, the BOJ increased the size of its asset purchase program by 10 trillion Yen, meeting some analyst estimates but failing to deliver the aggressive move that some politicians and economists feel the country needs to pull out of its deflationary state. The central bank also pared about 5 trillion Yen from its funding program to banks, citing lackluster demand for loans as the reason for the decision.

The overall increase to its asset purchase program was about 5 trillion Yen. So while traders initially reacted to the announcement by selling the Yen because of the increase in the BOJ asset-purchase fund to 40 trillion Yen from 30 trillion Yen, the intraday trend actually reversed once traders realized that the net gain was disappointing.

Since the central bank’s injection into the economy was not large enough to weaken the Yen and it was already priced into the market, traders can look for the June Japanese Yen to hold steady or appreciate over the near-term. Unless the BOJ takes a more aggressive stance against deflation, we’re looking at a firmer market.

After taking aggressive action to weaken the Japanese Yen in early February, the central bank appears to have let up on the gas a little and may be risking a 50% retracement of its gains. Since most interventions are eventually absorbed into the market, the key to sustaining the gains following the initial sell-off is to apply significant size in a consistent manner and then be willing to defend your stance.

By putting liquidity in, then taking a little out, the BOJ appears to have relaxed enough to concede, what may turn into a little too much, to the bullish traders. This may indicate that it actually made this move to satisfy the critics when deep down it felt injecting more liquidity was the wrong thing to do at this time.

Technically, while attempting to break out to the downside under the recent swing bottom at 1.2233, the June Japanese Yen found support on an uptrending Gann angle at 1.2277. The subsequent rally took out a long-term downtrending Gann angle at 1.2412. This put the currency in a position to challenge the recent main top at 1.2462. A trade through this level will turn the main trend to up and possibly fuel an acceleration into the major 50% price level at 1.2632.

Over the past 61 trading days since topping out on February 1 at 1.3174 and the past 31 days since bottoming at 1.1889 on March 15, the June Japanese Yen has traded inside of a triangular chart pattern. In technical circles, this is often described as a non-trending chart pattern. Because the support and resistance line gradually converge, daily prices tend to become compressed, often leading to volatile breakouts.

Now that the market is making its move through the downtrending resistance line of the triangle, traders should watch for a possible acceleration to the upside since there is really not a lot of resistance to stop it from rallying over the near-term into the 50% level at 1.2632.

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Even though the U.S. Federal Reserve set a softer tone for the U.S. Dollar on Wednesday, the Daily June Euro is trading lower overnight after the European Commission reported that its April economic sentiment indicator for the Euro Zone fell to 92.8 from 94.5 the previous month. Traders were looking for a reading of 94.2. Yesterday the Fed kept interest rates at near zero while hinting that more asset buying was a possibility should the economy begin to stumble. This news triggered some minor selling against the Greenback.

Technically, the Daily June Euro futures contract is trading lower after attracting selling pressure near a pair of downtrending Gann angles at 1.3274 and 1.3281. The main angle from 1.3494 was tested previously in late March and early April and proved to be strong resistance. In addition to finding resistance near the Gann angles, the Euro also entered the retracement zone created by the 1.3494 to 1.3000 range at 1.3247 to 1.3305. All of these technical factors had a hand in encouraging long traders to take profits and bearish traders to refresh their short positions.

On April 20, the main trend turned up on the daily chart when the Euro crossed the previous main top at 1.3218. The move took place without much fanfare with the single currency eventually reaching the overnight high at 1.3266. This probably means that the breakout was triggered by short-covering rather than new buying.

With pressure building on the down side this morning, traders should look for a possible break into an uptrending Gann angle at 1.3160. In an extreme case, the Euro could correct 50% of the rally from 1.3000 to 1.3266. This price level is at 1.3133.

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Amazon.com (AMZN) reports earnings after the close on Thursday. The online retail giant is expected to post higher revenue but lower profits. Kindle tablet sales along with a general increase in e-commerce sales is expected to boost revenues while investment in operation expansion is being blamed for the drag on short-term profits.

Investors will be most interested in the company’s profit margins due to the higher operating expenses from the expansion of its sales centers. Additionally, they will be watching for any weakness in Kindle sales.

Analysts are looking for earnings of 7 cents per share on average, compared with 44 cents a share for the same period last year.

Technically, Amazon is in an uptrend on the daily chart. Although the stock corrected substantially from it late March top at $209.85, the low at $183.65 did not take out a swing bottom, keeping the main trend intact.

Now that a range has been established between $209.85 and $183.65, traders can look for the first target today to be the 50% level at $196.75. The main upside target is a resistance cluster created by a combination of Gann angles and the Fibonacci retracement level. The uptrending Gann angle is at $199.65. The downtrending Gann angle lands at $199.35 and the 61.8% retracement price is at $199.84. This configuration could draw Amazon up toward the $200 price level.

On Wednesday, Amazon gapped higher on the heels of a strong earnings report from Apple Inc. (AAPL). This action put the stock on the bullish side of an uptrending Gann angle at $191.65. This angle should provide the support today. A break through this level will mean that insiders know something about the earnings report that analysts aren’t picking up.

Look for a bias to the upside today although weakness in the NASDAQ stock index because of profit-taking following Wednesday’s powerful rally could encourage some selling ahead of the earnings report.

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The technical analysis picture is looking better for bullish Daily June Australian Dollar traders as the market appears poised to challenge a downtrending Gann angle and perhaps breakout to the upside.

Currently, the Aussie is working its way through a maze of retracement levels at 1.0265, 1.0281 and 1.0304. This type of setup typically creates a labored move, but once these levels are cleared, traders usually emerge to drive it higher.

If the Australian Dollar can overtake all the retracement levels, then traders should watch how the market reacts to a test of the downtrending Gann angle at 1.0320. This angle has guided the currency lower for 40 market days since it topped at 1.0720 on February 29. Since bottoming at 1.0150 on April 11 and moving sideways, prices have consolidated enough to indicate an impending breakout. This will take place when the downtrending Gann angle is taken out.

The move through this angle will not change the trend on the swing chart. This will occur when the swing top at 1.0380 is violated; however, it will indicate a possible shift in sentiment to the upside. Shorts are likely to cover on the move, attracting the attention of momentum buyers who should arrive to drive the market higher.

Support comes in today on an uptrending Gann angle at 1.0250. Although it will be confirmed on a trade through 1.0380, the new minor bottom at 1.0182 has the makings of a secondary higher bottom. This is typically formed by traders following a closing price reversal bottom like the one created at 1.0150. The first rally following a closing price reversal bottom is usually short-covering. The secondary higher bottom is typically new buying. Counter-trend traders don’t mind buying since they have the reversal bottom to lean on.

Fundamentally, since reaching the bottom at 1.0150 on the heels of a bullish employment report and rallying to 1.0380, the Australian Dollar has traded softer as investors increased bets the nation’s central bank will lower interest rates. Slowing inflation is the driving force behind that thought. However, stronger global equity markets overnight have increased demand for higher risk assets, underpinning the Australian Dollar. The real challenge for Aussie traders will occur on the test of the downtrending Gann angle. Continued strength in the equity indices should make it easier to breakout above this barrier.

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The June E-mini NASDAQ futures contract is expected to open higher on Wednesday based on its strong performance overnight on the heels of an outstanding earnings report from Apple Inc. (AAPL).  The company reported earnings yesterday that almost doubled last quarter. The stock gained over 5% in after market trading, whetting the appetites of higher risk traders and driving up the tech-laden NASDAQ market.

The strong overnight move in the June E-mini NASDAQ futures contract has helped form a new minor bottom at 2624.75. Subsequently, a new minor range has been formed between 2735.00 and this bottom. The market is currently straddling the 50% level of this range at 2680.00. If the market can hold this level, then look for the move to continue into the 61.8% level at 2693.00.

Price and time analysis suggests that a downtrending Gann angle at 2703.00 is also a potential upside target, but reaching this level today is highly unlikely. However, this Gann angle crosses the 61.8% level at Point A on the chart on April 26, forming a potential resistance cluster at 2693.00 to 2695.00. Should the upside momentum continue into next week, the market has another potential target at Point B on the chart on April 30. This resistance cluster is 2707.00 to 2708.25.

Before getting too bullish, traders should keep in mind that the main trend is down and that the current action represents a short-term counter-trend rally. Because of the retracement and Gann angle configurations, the rally is expected to be labored with shorts likely to defend their positions. Additionally, the strong overnight action could chase away buyers who may be unwilling to pursue the market at current levels.

This usually means that any hesitation in the rally shortly after the opening could lead to a profit-taking break triggered by traders who bought on Tuesday prior to the Apple announcement. Yes, the news is good for the bulls, but traders have to avoid getting caught in a trap shortly after the opening. The key today will be reading the market after the opening since the overnight gains are so strong.

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Strong investor demand for risk fueled a rally in the Weekly June Euro futures contract on Friday, driving the currency pair to its highest level in two weeks. The Euro picked up where it left off on Thursday after German business confidence unexpectedly increased to a nine-month high.

Also helping to underpin the Euro was the news that governments committed more than $430 billion in new aid to the International Monetary Fund to help protect the global economy against a worsening European debt crisis. At a meeting in Washington, the Group of 20 finance ministers and central bankers pledged nearly double the amount currently available.

The Euro began the week under pressure as traders flattened long positions while awaiting an important Spanish debt auction. After the auction results ended up better than expected, the Euro tested the key 1.3000 price level, only to find it heavily defended. This ignited the initial rally which gained momentum on the IMF and German confidence news. It should be noted that the rally took place under thin trading conditions and short-covering. These gains may fade this week as Spain’s finances and the French presidential election take center stage.

With Spanish 10-year government bond yields topping 6 percent for a third time this week, the Euro may remain hemmed in by the $1.30 to $1.32 range. Eye-balling the weekly June Euro swing chart, it is going to take a move above 1.3391 before the main trend will turn up. With the weekly close at 1.3219, bearish traders have plenty of room for selling opportunities if the short squeeze continues into this week.

Even though investors reacted positively to the news from Germany, the strength of the report only highlighted the divergences between the strong economy in the north versus the debt-laden Euro Zone members in the south. Additionally, the report does nothing to alleviate the possibility of Spanish debt yields rising to 7 percent this week. Problems in the banking sector as well as the prospect for slower growth because of the newly proposed austerity measures are also key reasons why the Euro should remain under pressure. The weekly chart clearly illustrates that a break through 1.3000 will open the door for a fast move to 1.2700 to 1.2600.

Technically, after finding support inside of a minor retracement zone at 1.3069 to 1.2969, the June Euro rebounded to close above a Gann angle cluster at 1.3193 to 1.3205. The close at 1.3219 puts the market on the bullish side of the uptrending Gann angle at 1.3205 and the downtrending Gann angle at 1.3193 this week.

There is room to rally to the last main top at 1.3391, but above this price, the market is likely to run into resistance at a 50 percent price level at 1.3419 and another main top at 1.3494. On the downside, crossing back below 1.3193 could mean another test of 1.3069. With the main trend down on the weekly chart, investors should continue to wait for the next selling opportunity.

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The British Pound closed sharply higher against the U.S. Dollar this week, putting the currency on the bullish side of a Fibonacci retracement level at 1.6089 and setting up a potential test of a downtrending Gann angle at 1.6258. Traders should look for an acceleration to the upside once the 1.6165 swing top from the week-ending November 4 is violated.

Last week the British Pound rallied after minutes from the Bank of England’s latest meeting showed the central bank was less inclined to expand its bond-buying program. In addition, data showing an unexpected decline in the U.K.employment rate to 8.3% from 8.4% also drove up demand for theSterling. The British Pound received its final boost for the week on Friday after British retail sales volumes rose a stronger than expected 1.8% in March according to the U.K. Office for National Statistics.

The strength in the British Pound is a sign that near-term expansion of the bond-buying program is unlikely, however, the program has not been fully eliminated and may be reignited later in the year if demand becomes weak. Traders should also keep in mind that sovereign debt issues on the Euro Zone remain an active threat to the U.K.economy.

Traders should watch for profit-taking following the initial test of the Gann angle resistance at 1.6258. Any weakness should not be perceived as trend changing, however, a closing price reversal top on either the daily or weekly charts will be a sign that the selling is greater than the buying at current price levels.

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McDonald Corp., stock symbol MCD, releases first-quarter earnings results on Friday. This report will give investors their first look this year at how the company is coping with rising commodity costs. Last quarter, high commodity prices were one of the key reasons why the company reported a slightly lower profit margin. Analysts are estimating earnings of $1.23 per share on revenue of $6.3 billion according to Bloomberg.

Technically, the main trend turned down on the weekly chart when McDonald’s crossed the swing bottom at $95.13. The new lower swing top is $99.50. Based on the rally from early 2011 at $72.14 to the top in early 2012 at $102.22, the stock could be setting up for a 50 percent correction of this range to $87.18.

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After trading higher for three days, the June E-mini NASDAQ futures contract is retreating on Thursday following a test of a major retracement zone. Since the last break was 137.25 points in 10 trading days, from this morning’s top at 2735.00, swing chart analysis is protecting a potential move to 2597.75 by May 2.

At this time there are two key ranges at work. The first was formed by the 2569.50 bottom to the 2791.50 top. This range created a retracement zone at 2680.50 to 2654.25. The low earlier in the week hit squarely on the 61.8 percent retracement level, or the lower boundary. Shorts covered and bottom-pickers stepped in at this level, triggering a near-term correction.

This correction took the NASDAQ futures contract back to 50 percent to 61.8 percent of the break from 2791.50 to 2654.25, stopping at 2735.00, or inside of the retracement zone boundaries at 2722.75 to 2739.00. Based on Thursday’s action, the high at 2735.00 appears to be attracting fresh selling pressure which could trigger enough momentum to take out the recent bottom at 2654.25.

If this bottom fails along with the Fibonacci level then shorts are likely to press the market harder while weak longs scramble to bailout. Should this selling pressure continue over the next 10 market days then the June E-mini NASDAQ futures contract would be on course to reach its 2597.75 target by May 2.

One potential guide for this market will be the downtrending Gann angle from the 2791.50 top. This angle is at 2695.50 today and is moving down at a rate of 8.00 points per day. On May 2, this angle will be at 2615.50. So as long as the market can straddle or remain under this angle, let’s say it’s on course to balance price and time.

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The June Euro futures contract erased earlier gains against the U.S. Dollar and is now trading lower for the session. Overnight the single currency attempted an upside breakout after Spain’s well-received auction of government debt. As concerns about a possible bailout of Spain eased, shorts likely covered their positions, but refreshed once it became clear that buyers were not going to chase the Euro higher.

This trading action underscores the possibility that there is more to the Spanish debt crisis than just the bond auction. Although it may indicate that Spain has temporarily passed an important test of investor confidence, the country still faces an excessive debt issue, falling real estate prices and extremely high unemployment. In addition, the government must address the issue of fiscal austerity under the threat that the European Central Bank can at anytime curtail its current debt buying program.

With Spain selling 2.54 billion Euros of 2- and 10-year government bonds, figures that exceeded the top end of the government’s planned range of 2.5 billion Euros, the June Euro jumped higher, but could not attract enough buying pressure to exceed any important tops to change the main trend to up on the daily chart. This was a sign that buyers were backing way from the Euro and suggested that it was short-covering rather than fresh buying that was driving the market higher.

In hindsight, it looks as if the initial response to the bond auction was merely a relief rally and that Euro investors realized that Spain still face serious problems that are not likely to go away over the near-term.

Technically, the June Euro is still in a downtrend on the daily chart and will remain in this position until an important top is violated. Investors have done their part to defend the single-currency at the 1.3000 level, but no one seems interested in prolonging the rally by buying strength. Basically, the Euro is still in the hands of strong sellers.

This morning the June Euro is trading on the weakside of a short-term 50% price level at 1.3109 and threatening to trade below a major 50% price level at 1.3070. Sell stops are likely building under the 1.3000 to 1.2987 area, but heavy shorting as the market approaches these levels could trigger an acceleration to the downside once this area is breached.

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The EUR USD is trading in a tight range as traders await the results of the Spanish auction due to begin in a little more than 2 hours. The 60-minute chart offers an excellent perspective of what traders are facing at this time.

Based on the main range of 1.3212 to 1.2994, a retracement zone has been created at 1.3129 to 1.3103. The market has been trading inside of this range for several hours on very low volume. The Euro is also trading inside of a major triangle chart pattern. The upside resistance is currently near 1.3140 and the up sloping support line is near 1.3080.

When the auction results are released at 9:30 London Time, the resistance will be at exactly 1.3143. This price is the upside breakout level. The up trending support line will come in at 1.3080. This price is the downside breakout level.

Traders have to remember that this is going to be a momentum trade so after the Euro makes its move, don’t turn it into a trend trade if the market begins to pullback into the breakout zone. Get out after the momentum slows then reload if support or resistance is re-established. Keep in mind that the results of the Spanish bond auction will most likely set the tone for the day.

The June Euro is trading flat against the U.S. Dollar as investors take the sidelines ahead of tomorrow’s Spanish bond sale. As debt worries mount, investors will be taking a hard look at the action in Spain. This auction is considered a major test of Span’s ability to gain control of its financial and budgetary problems. Since Spain is the fourth largest Euro Zone country, a fear is building that a collapse will have a contagion effect on other major countries in the area.

Traders are taking a more cautious approach to this bond auction despite the favorable bill auction earlier in the week. This indicates that the market is more worried about the country’s longer-term status. In addition, traders are concerned that the European Central Bank may no longer be committed to buying government bonds. This action by the central bank has been keeping longer-term rates in check.

Technically, the June Euro touched a major 50 percent level at 1.3070 before mounting a small intraday rally. In addition, it has been straddling a downtrending Gann angle at 1.3114.

Earlier in the week, the Euro was once again defended heavily at 1.3000. This triggered a huge short-covering rally that stopped short of the recent short-term top at 1.3218. A breakout above this level will turn the main trend up on the daily chart, but the single currency is likely to meet selling pressure once again near 1.3250.

The first sign of weakness will be a break below 1.3070. This will be followed by a push through 1.3000. Traders should watch for an acceleration through this level with 1.2850 the next likely downside target.

Traders should note that the Euro may get quite active during the Spanish bond auction. This means it may be subject to choppy, two-sided trading before making its move through either 1.3218 or 1.3000.

Looking at the big picture, it appears the Daily June Australian Dollar has met a wall of resistance at a pair of tops at 1.0380. In addition, downtrending Gann angle resistance is also at 1.0380 today, making this price level a key resistance cluster.

Based on the main range of 1.0720 to 1.0150, a key retracement zone has been created at 1.0435 to 1.0502. A breakout over 1.0380 is likely to rally into this zone where it should meet resistance on the initial test of this area.

On the downside, Monday’s minor reversal from 1.0380 indicates that the selling is greater than the buying. In addition, Tuesday’s follow-through to the downside has helped form a new main top at 1.0380. This means that despite the strong rally from 1.0150, the main trend is still down since the series of lower tops and lower bottoms remains intact.

Furthermore, a failure to hold 1.0150 will signal a resumption of the downtrend and a likely test of the retracement zone formed by the major range of .9496 to 1.0720. This zone has been identified as 1.0180 to .9964. Additionally, uptrending Gann angle support is at .9986, forming a support cluster.

Zooming in on the short-term view of the Daily June Australian Dollar, traders should focus on the 1.0150 to 1.0380 range. Overnight, the futures contract has corrected back to a minor retracement zone at 1.0265 to 1.0238. Helping to form additional support is an uptrending Gann angle at 1.0230. This angle forms a support cluster with the Fibonacci level at 1.2038 to 1.0230. A break through this area is likely to trigger an acceleration to the downside.

Fundamentally, the Australian Dollar is under pressure on concern thatEurope’s debt crisis is worsening. This is leading to a drop in demand for riskier assets. Additionally, seller applied pressure to the Aussie after minutes of the Reserve Bank ofAustralia’s last meeting suggested that the central bank is ready to cut interest rates.

The EUR USD finished sharply lower to end the week as investors reacted to the rise in Spanish debt yields to their highest levels in months and to weak data on U.S. consumer sentiment. Disappointing news regarding Chinese economic growth also underpinned the Greenback.

While the weaker-than-expected China GDP data may have been the catalyst for the dollar’s early strength against the Euro, the main driver of the weakness in the EUR USD was the rise in yields in Spain. Yields on Spain’s 10-year debt rose back to 5.95%, their highest level since November. Traders drove up yields after learning about significantly increased borrowing by Spanish banks from the European Central Bank.

Developments in Spain are expected to be watched closely due to the size of its economy. This means that Euro Zone officials may have to come up with more creative ways to shore up its finances because an outright bailout may not be possible.

In the meantime, traders are looking for the ECB to continue to purchase Spanish debt, but at some point this buying may dry up as the central bank begins to question its own actions. With yields also rising in Italy, the ECB may be forced to decide which country gets the most attention. The commitment to austerity may be the deciding factor as too which country becomes the favored nation.

Technically, the weekly outlook for the EUR USD looks bearish. The Weekly EUR USD Combination Chart (Fig. 1) may look confusing, but the combination of Gann angles, retracement levels and swing points all indicate a bias to the downside. Let’s breakdown the main components of this market that support this assessment.

(Fig. 1) Weekly EUR USD Combination Chart

The Weekly EUR USD Main Trend Indicator Chart (Fig. 2) measures the 2-bar swings in the market. The main trend is down based on the series of lower-tops and lower-bottoms. Even though the market appears to be going through a transition period since bottoming at 1.2623 in January, it hasn’t crossed any main tops and appears to be in a position to take out a bottom at 1.3003. This action would be further evidence that it is headed lower.

On the upside, a trade through 1.3385 will be a sign of developing strength, but to be safe a move through the main top at 1.3485 will be a more dependable indication that the trend is turning to up in the EUR USD.

(Fig. 2) Weekly EUR USD Main Trend Indicator Chart

While the main swing chart focuses on the 2-bar tops and bottoms or horizontal support and resistance levels, the Weekly EUR USD Gann Angle Chart zeroes in on the diagonal movement.

This chart suggests that the resistance is at the downtrending Gann angle from the 1.4247 top. This angle has stopped the rallies two out of the last three weeks. For the week-ending April 20, this resistance angle is at 1.3247.

Since bottoming in January at 1.2623, an uptrending Gann angle has provided support. This angle is at 1.3183 this week. Although there have been two penetrations of this angle over the past two weeks, it still acted as a pivot last week. The close under this angle on Friday suggests that the EUR USD may be setting up for a move into the next uptrending Gann angle at 1.2903.

Taking the two angles together, one can see a triangle chart pattern. The triangle chart pattern is a non-trending pattern. The gradual compression of the price ranges typically means impending volatility. The breakdown through the support line of the triangle indicates selling pressure. Now all that is needed to drive the market lower is rising volume and increased volatility. This may not occur, however, until the swing bottom at 1.3003 is violated.

(Fig. 3) Weekly EUR USD Gann Angle Chart

Besides the main trend indicator chart, the percentage retracement chart also indicates horizontal support and resistance levels. Based on the main range of 1.4247 to 1.2623, the major 50% to 61.8% retracement zone is 1.3435 to 1.3626. The 50% retracement level stopped two rallies at 1.3485 and 1.3385. This makes it a key resistance level. When combined with the two swing tops, a breakout above this level will not only indicate the main trend has turned up, but could also trigger an acceleration to the upside.

On the downside, the short-term range is 1.2623 to 1.3485. This range has created a retracement zone at 1.3054 to 1.2953. This area has been providing the support. Recently, the 50% level at 1.3054 has been tested twice and may be ready to give way. If the EUR USD trades down to the Fibonacci level at 1.2953, this will mean the main swing bottom at 1.3003 will have been broken. This action should put the Euro in a weak position.

(Fig. 4) Weekly EUR USD Percentage Retracement Chart

Putting it all together, it is pretty clear that the main trend is down in the EUR USD and that this currency pair may be setting up for a sharp break. The key price level to watch is 1.3003 as this number turns up on all three technical strategy charts. Stops may be building under this level and shorts may be ready to press the market through this point. Although bottom-pickers may continue to come into the market, this should only serve to slow down the break. Sentiment appears to be on the side of the short-traders and shouldn’t change unless the swing top at 1.3385 is violated.

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The Weekly U.S. Dollar/Canadian Dollar, symbol USD CAD, has an interesting chart pattern. Based on the main range of .9406 to 1.0667, a retracement zone has been created at 1.0031 to .9884. Since crossing the 50% level at 1.0031 the week-ending January 27, this currency pair has straddled the zone, finding resistance at the upper level and support at the lower Fibonacci level at .9884.

Although the main trend is down, a main bottom has formed at .9841, creating a support base and giving the currency pair a slight bias to the upside. Earlier this week, traders once again rejected 1.0031, setting up the market for a possible retest of the lower boundary at .9334. This type of trading indicates indecision.

This conclusion is being supported by the triangle chart pattern that has been formed by a pair of Gann angles. From the bottom at .9406, a 37-trading day uptrending Gann angle is at .9776 this week. A 27-trading day downtrending Gann angle from the 1.0657 top comes in at 1.0117. These two angles form the support and resistance lines of the triangle chart pattern.

A triangle chart pattern is a non-trending pattern. The fact that the USD CAD currency pair is consolidating or moving sideways inside of the triangle makes it a non-trending pattern. This action is compressing the price action which often indicates impending volatility. Adding to the price compression is tight trading ranges being created by the 50% and 61.8% retracement zone.

As the market moves through the triangle, prices could compress even further until the USD CAD reaches the apex of the triangle. From the chart, you can see that the apex crosses the Fibonacci level near .9884 sometime in late June or early July. Based on this assessment, the U.S. Dollar/Canadian Dollar could remain rangebound for a few more months.

Traders often get agitated while a market is consolidating, but there is nothing that can be done at this time as long as the Bank of Canada and the Fed continue to give mixed signals. That is unless you like to trade ranges until a breakout occurs.

Obviously, the USD CAD can break out at anytime before reaching the apex, but it seems to be on a clear path to remain inside the triangle until time is up. Around the middle of May, the downtrending Gann angle or upper resistance line of the triangle crosses the 50% level at 1.0031. This marks a time and price area where under the right conditions, the USD CAD can breakout to the upside. If this breakout doesn’t occur, then the currency pair is destined to remain inside the triangle until the chart pattern is completed in late June or early July.

From a fundamental standpoint, until the Bank of Canada decides to begin raising interest rates or the U.S. Federal Reserve makes it clear that interest rates will remain low until 2014; the USD CAD will remain rangebound. Next week the Bank of Canada releases its monetary policy report. This decision could move the market. So while a triangle pattern can cause a trader to look elsewhere for action, it should be reiterated that this chart pattern often acts as a transition between sideways to volatile trading. Traders should keep an eye on this currency pair because it may be setting up for a strong move. Patience is the key to trading the USD CAD at this time.

The June Australian Dollar futures contract is trading nearly 1 percent higher against the U.S. Dollar after the release of data that showed the country’s unemployment rate unchanged from February at 5.2 percent. The number of jobs added was much stronger than expected and is helping to set the tone for a “risk on” trading day.

The overnight surge in the Australian Dollar was triggered after data showed that employers added almost seven times the number of workers in March than forecast. Australia’s bonds fell, pushing all government debt yields below their three-month averages. This action helped ease prospects the Reserve Bank of Australia will cut interest rates at its next meeting in May.

Pre-report estimates had Australian payrolls increasing by 6,500, but the report surprised traders by rising 44,000. In addition, the jobless rate held steady at 5.2 percent, compared with early estimates of 5.3 percent. The strength of the report put an end to talk that the RBA would need to cut interest rates by 50 basis points in an effort to revive the economy.

Overnight, the Daily June Australian Dollar confirmed Wednesday’s closing price reversal bottom, setting up a minimum 2 to 3 day rally into at least 50 percent of the break from 1.0720 to 1.0150 at 1.0435.

If the Australian Dollar reaches this short-term objective then the main trend will turn up since the main top at 1.0380 will have been crossed in the process. Standing in the way of a straight shot into the retracement level is a downtrending Gann angle at 1.0410 today.

If upside momentum is strong and supported by rising volume and volatility then investors are likely to buy with more conviction since they will be driven by the clarity generated by the strong jobs report. It’s too early to get bullish about the Aussie yet, but the groundwork has been laid for the start of a meaningful rally.

Stock Market Bear (Photo credit: jhyerczyk)

Equity markets and the U.S. Dollar traded lower after the government reported that the U.S. economy added only a 120,000 jobs in March. This was the smallest increase in five months, bringing an end to the recent string of strong gains. The number of jobs added last month was well below the pre-report estimates of a 210,000 increase. In addition, this marked the first time since November that the employment gains failed to top the 200,000 mark.

Immediately after the release of the data, equity markets broke sharply from their pre-report highs. Momentum was strong; however, thin trading conditions because of the observance of Good Friday may have exaggerated the move to the downside. By the end of the shortened trading session, the Dow was down triple digits. With the futures indices being offered into the close, traders are anticipating a follow-through break when trading resumes on Monday.

While stock traders were paring positions because of a weak outlook for the U.S. economy, the U.S. Dollar was falling as Treasury Bond and Note yields dropped to levels not seen in two weeks. The USD JPY Forex pair was hit especially hard as prices were down almost 1 percent.

Traders should be cautious about reading too much into Friday’s moves as most were taking place under holiday trading conditions. The reactions seem to be almost by the book except for the drop in the equity markets. With interest rates falling, the break in the Dollar was expected, but the sell-off in the equity markets is a bit of a surprise. After digesting the information over the week-end, investors may feel the same way, making this investment sector ripe for a reversal back to the upside.

The June Swiss Franc continued to weaken against the U.S. Dollar overnight after straddling a 50 percent price level on Wednesday. The dollar has been strong since Tuesday after the U.S. Federal Reserve Minutes revealed that the central bank is not considering additional quantitative easing at this time.

Technically, the main trend is down on the daily chart. This trend turned down after the single currency crossed the last swing bottom at 1.1008 earlier in the week. The main range is 1.0725 to 1.1119. This range has created a retracement zone at 1.0922 to 1.0876. After trading on both sides of 1.0922, traders broke this 50 percent level with conviction overnight, driving the market into the Fibonacci retracement level at 1.0876.

In addition to the horizontal support levels, the June Swiss Franc is also testing an uptrending Gann angle at 1.0875 while walking down a steep downtrending Gann angle at 1.0879. This set-up has created an important support cluster with the Fibonacci retracement level at 1.0879 to 1.0875.

With the main trend down, pattern, price and time analysis is suggesting that we could see a counter-trend technical bounce from this cluster, but if it fails to hold, the June Swiss Franc may continue to drop into another uptrending Gann angle at 1.0800 today.

June Gold is under pressure this morning after taking out uptrending Gann angle at $1660.60 and a swing bottom at $1646.70. In addition, the metal also broke through the March 22 bottom at $1629.80, setting up the market for a possible acceleration to the downside.

With the trend decisively lower and downside momentum building, expectations are for June Gold to continue to weaken into an uptrending Gann angle at $1594.60.

The catalyst behind this morning’s weakness is the stronger U.S. Dollar. On Tuesday, the U.S. Federal Reserve minutes lit a fire under the dollar when they revealed that chances of additional quantitative easing have been diminished. Simply stated, a stronger dollar means weaker commodities including Gold.

Trend traders are expected to continue to push this market lower as long as the lower-top, lower-bottom remains intact. Counter-trend traders may begin bottom picking if the Gann angle at $1594.60 is tested.

The June Euro is continuing to plunge overnight following Tuesday’s reversal to the downside. After turning the daily main trend to down on the move through 1.3257, the single currency blew through a key 50 percent price level at 1.3200.

The next possible downside target is the 61.8 percent retracement level at 1.3155. In addition, an uptrending Gann angle is at 1.3149 today, making 1.3155 to 1.3149 a possible support cluster. Short traders should watch for a technical bounce to the upside if this cluster is tested.

The Euro weakened considerably against the U.S. Dollar on Tuesday after the Federal Reserve minutes showed that the central bank was likely to refrain from any further asset purchases.

This morning the European Central Bank is expected to leave its benchmark lending rate unchanged at 1.0 percent. A little less than an hour after its monetary policy announcement, ECB President Mario Draghi may put a little more dovish spin on further central bank activity during his press conference in light of the weakness being exhibited in the Euro Zone.

Besides the central bank meeting, traders are keeping an eye on a developing situation in Spain after an auction of Spanish debt saw borrowing costs rise and demand weaken. This added to concern the Euro region is struggling to overcome its sovereign debt crisis.

The technical picture of the June Euro futures contract is suggesting impending volatility. The tight range being woven between 1.3391 and 1.3257 may be a sign of indecision, but once traders choose a direction, it is likely to move in a big way. It all may come down to Wednesday’s European Central Bank meeting and the post-meeting commentary by ECB President Draghi. However, even before the meeting, a hard drop in the U.S. Dollar may be the catalyst the Euro needs to accelerate to the upside. This could be caused by dovish commentary in today’s FED Minutes.

Currently, the June Euro is trading on the bullish side of a key retracement zone so there is a slight bias to the upside. In addition, the main trend on the daily chart is up. According to the daily swing chart, the Euro is likely to accelerate to the upside through the March 27 main top at 1.3391; however the main trend will turn down on a trade through the March 29 main bottom at 1.3257.

The first clue that traders are gearing up for an upside breakout will be a solid close over the downtrending Gann angle at 1.3359. This angle has rejected the Euro at least four times over the last six days. If this angle is overcome by strong buyers then the next target will be the downtrending Gann angle at 1.3427.

On the downside, the most important uptrending Gann angle is at 1.3269 today. This angle has held as support since the Euro bottomed at 1.3009 on March 15. A convincing break through this angle will mean that sentiment is shifting to the downside and that traders are getting ready to pressure the June Euro.

At 1 p.m. central time, the U.S. Federal Reserve will release the minutes from its Open Market Committee meeting on March 13. The minutes could settle the debate as to whether the Fed members are truly behind the assessment that the economy is improving and that there may not be a need for additional stimulus in the form of additional bond-purchases.

Pulling in the reins of additional quantitative easing is likely to have a bullish influence on the U.S. Dollar while pressuring the Euro. A dovish tone or indications that there is a split among Fed members in gauging the strength of the U.S. economy could mean that additional quantitative easing is still on the table. Since this is akin to printing more money, the Dollar could fall, pushing the Euro higher.

June Euro traders are also watching the activity in Spain this morning ahead of tomorrow’s ECB meeting. Rising debt rates in Spain suggest that investors fear that the nation may not be able to reduce spending enough to ward off a sovereign debt problem. This could trigger another sell-off in the Euro because of the fear of contagion.

Euro traders are looking for the central bank to leave interest rates unchanged at 1.0% at its monetary policy meeting on Wednesday. In addition, the recent rise in the Euro may be suggesting that the central bank is poised to have a more hawkish tone in its assessment of the Euro Zone economy.

In summary, the rangebound June Euro is poised for a volatile move but the direction is unclear at this time. A breakout over 1.3391 is likely to greenlight a rally while a break through 1.3257 could trigger an acceleration to the downside.

After reaching 1.0461 on Tuesday, the June Australian Dollar reversed course to finish lower for the day. The move came as no surprise since the main trend is down and the market was nearing retracement zone resistance at 1.0517 and a former top at 1.0529. In addition, downtrending Gann angle resistance would have probably stopped the rally at 1.0530.

Overnight, the Australian Dollar broke through an uptrending Gann angle at 1.0336 indicating weakness. The break put the currency squarely on a downtrending Gann angle at 1.0320. A trade below this angle will weaken the market further while putting it on a course to reach a major 50 percent price level at 1.0108 on April 11.

The first leg down from the 1.0720 top was .0406 in 10 market days. A similar move from the 1.0529 top on March 19 will take the June Australian Dollar to 1.0123 on April 2 (See X). At this point, price and time will balance and the market may embark on another short-covering rally.

Fundamentally, the Aussie Dollar weakened overnight as Asian stocks retreated from Tuesday’s high. With demand for higher-yielding assets falling, traders are expecting the move to continue into the New York trading session.

In addition to the weakening global equity markets, concern that Chinese manufacturing may slow over the near-term is putting further pressure on the market. Demand for Australian resources is expected to fall which is making traders cautious about holding long positions.

Traders will be watching Wednesday’s U.S. Durable Goods report today for clues of a strengthening economy. A strong report will underpin the U.S. Dollar while pressuring the Aussie.

With the end of March coming up this week, it’s time to revisit the Nearby Euro Monthly chart. If you recall, in January the Euro posted a low at 1.2637 while forming a closing price reversal bottom.

This type of bottom usually leads to a 2 to 3 month rally equal to at least 50 percent of the last break. From a timing perspective this means a rally into March or April. Based on the break from 1.4908 to 1.2637, the first retracement target is 1.3773.

In February, the Euro confirmed the closing price reversal bottom but found resistance on a downtrending Gann angle near 1.3498. This month the same angle is at 1.3308. In April, this angle drops down to 1.3148.

After finding support at the short-term retracement zone at 1.3068 to 1.2966 earlier this month, the Euro has surged to temporarily regain a steep uptrending Gann angle at 1.3277. Next month this angle moves up to 1.3597. In order to continue this torrid pace, the market is going to have to continue to accelerate at .0240 per month just to reach this angle in April.

Since the uptrending and downtrending Gann angles cross this month at 1.3277 and 1.3308 respectively, traders have to consider this to be a resistance cluster. Therefore, Tuesday’s early breakout through this cluster could be a sign that the Euro is going to finish the month strong.

Besides regaining the Gann angles, it would be nice if the Euro took out last month’s high at 1.3498. This move would make 1.2637 a new swing bottom and may give the market more upside momentum. This would help greatly the Euro quest to reach the 50 percent price objective at 1.3773.

May Silver is trading firmer overnight following Monday’s strong surge to the upside. The rally in silver was fueled by dovish comments from U.S. Federal Reserve Chairman Ben Bernanke.

The overnight move in silver does not change the trend to up, but it did help to form a new main bottom at $31.09. Currently, the market is walking up a very steep Gann angle at $33.01. Additional support comes in at $32.05 and $31.57.

Based on the main range of $37.58 to $31.09, expectations are for this market to eventually complete a 50 to 61.8 percent retracement of this range to $34.34 – $35.10 respectively over the near-term.

Downtrending Gann angle resistance comes in at $34.54 on Tuesday. It is currently splitting the retracement zone, but drops in at $34.38 on March 28 to form a resistance cluster with the 50 percent level at $34.34 (See Arrow). This is the expected upside target.

Counter-trend traders may want to hold on for a retracement into this price area, but have to remember that in order to reach this resistance cluster on time, the market must maintain a 64 cents per day upside move. Otherwise the May Silver will revert to a slower moving Gann angle and change the timing of the trade.

Trend traders may want to wait for a move into the resistance zone before considering re-entering on the short side of the market. While the target prices are good, there has to be a shift in momentum to the downside when they are being tested.

If a stopper doesn’t start offering or if buying pressure doesn’t subside, then prices may continue to rise. This will be especially true if the rally is event driven like Monday’s rally. Despite having solid upside targets, this is only analysis. As a trader, you have to be aware of the order flow at the time the area is being tested. In addition, you have to know your exit before you determine your entry.

The Euro is posting a strong gain versus the dollar after earlier weakness. Intraday charts reversed to the upside on Monday after U.S. Federal Reserve Chairman Ben Bernanke warned that faster economic growth was needed to improve the country’s employment outlook.

In a speech to the National Association for Business Economics, Bernanke greenlit Monday’s rally when he expressed uncertainty that recent improvement in the labor market can be sustained.

His comment may have given traders the clarity they were looking for after weeks of searching for clues to prospects for further monetary stimulus measures by the central bank. For weeks the U.S. Dollar had been trading almost sideways due to speculation that Fed officials would refrain from further stimulus.

Earlier in the month and prior to the release of weaker than expected U.S. inflation data, longer-term interest rates began to rise as traders began to factor in the possibility that the Fed would raise interest rates sooner than expected.

Today’s comments all but destroyed the hopes of bullish dollar traders who had positioned themselves for a stronger Greenback. Using the word “accommodative” several times, Mr. Bernanke erased almost all doubt that the Fed would stay its course and keep the current stimulus in place while leaving the door open for further incentives if the economy continued to weaken.

From a longer-term perspective, the Fed may shift gears later in the year if inflation becomes an issue. This condition may force it to begin tightening by the end of 2012. This will help to underpin the dollar, but over the short-run it looks as if the Greenback is going to trade lower.

Despite today’s breakout to the upside, Euro traders may see gains limited over the near-term if Spain’s sovereign debt issues resurface and contagion fears reignite. This situation should be watch closely because the Euro can turn down just as fast as it turned up on Monday morning.

Technically, the EUR USD broke through Fibonacci level resistance at 1.3301 to trigger a strong surge to the upside. This price is now the new support along with an uptrending Gann angle at 1.3283. This aggressive buying sets up a potential rally into a downtrending Gann angle at 1.3380.

From a longer-term perspective, Monday’s rally also put the EUR USD on course to retrace at least 50 percent of the break from late October to January. This range is 1.4247 to 1.2623 and the first upside target is 1.3435.

In summary, Bernanke’s comments could be setting a bullish tone over the short-run; however, traders should not expect to see a vertical breakout similar to Monday’s move. The trend is pointing higher, but traders have to continue to be aware that issues in Spain could derail the rally at anytime.

The expected sharp break in April Gold didn’t materialize last week as a big buyer stopped the market 50 cents under the Fibonacci price level. After consolidating for several days, April Gold appeared poised to breakout to the downside after piercing an uptrending Gann angle and finding resistance at a downtrending Gann angle. In addition, the market was trading on the bearish side of a 50 percent price level. Expectations were for the market to accelerate to the downside once the Fibonacci level was broken.

The inability to attract the selling pressure to drive April Gold lower may have been triggered by a lack of conviction by traders who were having trouble reading the movement in the U.S. Dollar. Nonetheless, after failing to collapse, the market reversed to the upside and by the end of the week had closed on the bullish side of a key downtrending Gann angle and 50 percent zone.

The important support area to watch on Monday is at the cluster created by an uptrending Gann angle at $1644.20 and a downtrending Gann angle at $1640.70. This is where the two angles nearly cross on the chart. Both prices are inside the major retracement zone identified as $1659.45 to $1628.00.

On the upside, the first target is a minor retracement zone created by the short-term range of $1717.40 to $1627.50. This zone is $1672.45 to $1683.06. If buyers can overtake this zone then April Gold will have room to the upside. The next major upside target is a downtrending Gann angle and a 50 percent price level. They form a resistance cluster on Wednesday, March 28 at $1708.70 to $1710.10.

Technically, oversold conditions may be contributing to the market’s short-term bullishness. The action on Thursday and Friday appear to have shifted sentiment to the upside, but at this time is not threatening to turn the main trend back up. All indications at this time point toward this as being a retracement move.

Fundamentally, rising bond yields, a stronger U.S. Dollar and higher stock prices are the main reasons why interest in the long side of gold has fallen. Demand has softened despite continued central bank buying of gold and the almost ritualistic flooding of the market with cash. In addition, India announced that it was going to double the tax on gold imports. Since the deck seems to be stacked against gold at this time, the conclusion is that last week’s late surge was triggered by technical factors.

Since these bearish fundamental developments are not expected to go away over the near-term, I have to conclude that the rally should be short-lived and that investors are likely to pare their positions on the impending retracement. This should come to fruition if stock prices continue their assault of multi-year highs.

The unknown factor at this time is China. If this country continues to support the market on dips while encouraging the buying of gold to fight inflation then the expected wash-out to the downside may never take place. This could mean that gold is destined to trade in a wide range over the intermediate term.

Bubble-traders seem to be supporting the short-side of the market and still have a grip on the downtrend, but sentiment can shift fast especially if investors decide to shift from one asset class to another. Just take a look at the bond futures chart to see what can happen when one asset class falls out of favor even if it’s only over the short-run. If a shift is going to occur to the upside in gold then it is likely to coincide with a major correction in the stock market. Keep an eye on gold and the indices this week to see if money is leaving equities and re-entering gold.

The June Euro fought back after a weak start to finish higher for the week and in a position to breakout out above a major downtrending Gann angle and retracement zone resistance cluster. Once the single currency advances past this resistance, it will be in a position to test the main top at 1.3494 from February 24.

Two weeks ago, the Euro found support at 1.3009 on March 15. This price was squarely inside the retracement zone created by the 1.2645 to 1.3494 trading range. In addition, an uptrending Gann angle provided support at 1.3005. This angle moves up to 1.3085 this week and remains key support.

Based on the short-term range of 1.3494 to 1.3009, a retracement zone has formed at 1.3252 to 1.3309. Last week the market regained the first level or 50 percent price, but fell short of the second level or 61.8 percent level. In addition, a downtrending Gann angle provided resistance at 1.3298.

This week the retracement zone remains the same, but the downtrending Gann angle drops down to 1.3258. This forms a tight resistance cluster that could prevent the Euro from rallying, but because of the strong close, is likely to be a breakout zone.

In order for this breakout to occur, upside momentum must continue. High volatility and rising volume would be good signs that traders are supporting the move. Once the market clears this resistance cluster then look for it to become support. If support can form then the Euro will be in a strong position to test the February top at 1.3494 over the near-term.

Traders should keep in mind that upside momentum is the key. If buyers don’t show up with confidence and clarity then the Euro may retrace to the downside once again to retest the support cluster formed by the uptrending Gann angle at 1.3085 and the retracement zone at 1.3070 to 1.2969.

Fundamentally, pressure eased on the Euro after the European Central Bank last month boosted liquidity through three-year loans to banks and after the European Union leaders finalized a second Greek bailout package. Although there have been some glitches the past two weeks because of speculation that the U.S. economy was improving, the Euro has recovered and appears to have regained the course set forth by January’s monthly reversal to the upside.

Although the risks of contagion have been limited, they could flare up fairly quickly if sovereign debt problems in Spain reignite a crisis in Europe. This week, Euro Zone ministers will be preparing a deal to bolster the region’s financial firewall. Any problems in hammering out this deal could derail the Euro’s anticipated breakout rally.

The AUD USD weekly trend turned down a couple of weeks ago when the currency pair crossed the swing bottom at 1.0597. After a few attempts on the daily chart to retrace the break, short-traders finally pressed the market enough to trigger a sharp break into an uptrending Gann angle from the October 2011 bottom at .9387.

This week’s low is 1.0335. This price is .0012 below the uptrending Gann angle at 1.0347. Oversold conditions or profit-taking may have led to the technical bounce after this price was tested, but the turnaround was hardly strong enough to form a closing price reversal bottom or even suggest that a change in trend to up was likely.

The chart pattern suggests that there is plenty of room to the downside if 1.0347 can be taken out with conviction. This is a fancy way of saying “I’d like to see increasing volatility and rising volume on the breakout.” Even if the AUD USD cannot break this Gann angle on Friday, a close below 1.0387 will put the market on the bearish side of the uptrending angle which moves up by .004 next week.

With the main trend down and the market getting pressure from traders dumping higher yielding assets because of a weakening economy in China, the AUD USD seems poised to drop even further over the near-term. Based on the main range of .9387 to 1.0856, traders should start anticipating the possibility of a 50 percent or more retracement of this range. If short-sellers hit this market with fervor then expectations are for a possible break into 1.0121 to .9948. Price and time analysis suggests that a move to .9948 is possible by the week-ending April 20.

Even if today the AUD USD trades rangebound, traders should remember to watch for a close below 1.0387. If this occurs then be ready from the get-go next week because the market will be on the weakside of an important Gann angle and in a position to sell-off sharply.

The daily June E-mini NASDAQ market confirmed Wednesday’s closing price reversal top when it broke through 2730.00. The market is now set up for a 2 to 3 day break equal to at least half of its last rally. Although a closing price reversal top indicates that the selling is greater than the buying at current price levels, it does not necessarily mean a change in the trend.

Currently, the June E-mini NASDAQ contract is testing a long uptrending Gann angle at 2718.50. This angle has provided support for 64 market days. Recently the index broke through this angle, but quickly recovered. At a minimum, expectations are for traders to react the same way if this angle is broken. This means that a break into the uptrending Gann angle from the 2569.50 bottom at 2665.50 is likely over the near-term.

A failure to hold the Gann angle at 2665.50 will mean that selling pressure is building. This should lead to the completion of a 50 to 61.8 percent retracement of the rally from 2569.50 to 2748.50. This retracement zone has been identified as 2659.00 to 2637.75.

In summary, a potentially bearish closing price reversal top has been confirmed. This should lead to increased selling pressure as long as this top isn’t violated. The first downside target is 2718.50, followed by a steep drop-off to another target at 2665.50. If this price can’t hold as support then look for further weakness to 2659.00 to 2637.75.

May Silver is beginning to show signs of weakness as it trades on the bearish side of a key 50 percent level. After several days of consolidation, the market seems poised to resume its current downtrend.

Based on the main range of $26.27 to $37.58, a key retracement zone has been created at $31.93 to $30.69. With the market currently trading on the weakside of $31.93, traders should look for selling pressure to drive May Silver into the Fibonacci level at $30.59.

In addition to the retracement zone, the market is also trading under the influence of a pair of Gann angles. These Gann angles have formed a triangle chart pattern that is indicating impending volatility. The triangle chart pattern is a non-trending pattern. The gradual narrowing of the support and resistance lines compresses the market, setting it up for a volatile breakout move. Since the main trend is down, this next move is likely to be to the downside.

Currently, a downtrending Gann angle is providing resistance at $32.46. May Silver is likely to remain in a bearish state as long as it remains under this Gann angle. The first downside target today is an uptrending Gann angle from the $26.27 bottom at $30.83. A break through this price will likely mean a test of the Fibonacci level at $30.59. Once the market clears this minor support cluster, May Silver is likely to accelerate to the downside since the nearest support level is $29.00.

After several days of sideways trading, May Silver appears to be readying for a resumption of its downtrend. Like any breakout pattern, increased volatility and rising volume should help drive up momentum. This would be a strong sign that short-sellers are trading with clarity and conviction.

After meeting resistance earlier in the week at a key 50 percent retracement level at 1.0517, the June Australian Dollar formed a secondary lower-top, triggering the start of a new down move.

Not only did the Australian Dollar break through a previous main bottom at 1.0314, but it also took out a long-term uptrending Gann angle from the November 23 bottom at .9496. This angle comes in at 1.0296 today.

Based on the major range of .9496 to 1.0720, the Australian Dollar could be headed toward a 50 to 61.8 percent retracement of this range. This makes 1.0108 to .9964 the next potential downside target zone. There is no price and time set up with a Gann angle so the timing of this break is difficult to predict. However, the main swing chart may offer us some insight.

The first break from the February 29 top at 1.0720 to the March 14 bottom was .0406 in 11 market sessions. Taking the most recent main top at 1.0529 and subtracting .0406 yields a price target of 1.0123. Since the 1.0529 top was created on March 19, an 11-session break makes April 2 a key balancing date. Should the market continue on its current slide, traders should look for a move to 1.0123 on April 2. Reaching this price level before the date will mean that price is ahead of time. Additionally, should the date pass without reaching this price target then consider the market to be stronger than forecast.

Fundamentally, an economic slowdown in China and the lack of demand for higher yielding assets are two reasons why the Australian Dollar is trading weaker. Technically, the main trend is down and likely to continue to weaken further. Now that a major Gann angle has been pierced, short-traders should look for the down move to continue with 1.0123 the next likely target over the next week and a half.

April Gold broke through the support line of a triangle chart pattern and is now in a position to weaken further into a Fibonacci price level. If this level is broken, the market may accelerate to the downside.

After several days of consolidation inside of a 50 percent to 61.8 percent retracement zone, April Gold appears to be making its move to the downside. The impending break will be a continuation of the current downtrend which began several weeks ago. At this time, the 50 percent level at $1659.45 is resistance while the Fibonacci level at $1628.00 is support.

A pair of Gann angles is also combining to form a triangle chart pattern. A downtrending Gann angle from the $1792.70 top is providing resistance at $1658.70. An uptrending Gann angle at $1640.20 has been violated, setting up the market for further downside action.

Now that the support angle has been broken, April Gold is set up for a possible acceleration to the downside. The current chart pattern suggests that there will be plenty of room to the downside once $1628.00 is violated. If this move takes place as anticipated, then traders should look for a possible break into another uptrending Gann angle at $1583.20.

The triangle chart pattern is a non-trending pattern. The gradual narrowing of the support and resistance lines compress the price action often leading to a volatile move. Traders typically “go the way of the move”, but in this case since the main trend is down, traders have been expecting the market to break. Now that support has been penetrated, traders should look for increased volatility coupled with rising volume to drive this market lower.

The strong turnaround in the June Canadian Dollar has put the market in a strong position to breakout to the upside on the weekly chart. After posting an expanded range four weeks ago and topping at 1.0133, the Canadian Dollar has since held two tests of a major 50 percent price level at .9938 while trying to establish support on an uptrending Gann angle at 1.0064 this week.

The current chart pattern suggests that the Canadian Dollar could breakout through the March 1 top at 1.0133, but is likely to run into some resistance at the downtrending Gann angle at 1.0175. Once this level is cleared the next likely upside target will be September 1, 2011 top at 1.0202.

Based on the main range of 1.0515 to .9360, a key retracement zone has been established at .9938 to 1.0074. Crossing over to the bullish side of this zone will be a sign of strength and a resumption of the uptrend which is why bullish and bearish traders have been battling for several weeks since this zone was first tested.

The important levels to watch are 1.0064 and 1.0074. This is basically a crossing of a diagonal line (an uptrending Gann angle) and a horizontal line (retracement level). Now that the market has crossed to the bullish side of these two points, an important support cluster has formed. This cluster is controlling the short-term direction of the market. As long as this area holds as support, buyers are likely to try to drive the market higher. A failure to hold this zone late in the week could lead to a collapse in the market.

The Canadian Dollar has been trading sideways-to-lower since gold topped and began to sell-off. Now that gold is setting up for a volatile move, Canadian Dollar traders should brace for the same type of trading activity. A breakout to the upside in gold is likely to trigger a similar move in the Canadian Dollar.

April Gold has been trading in a tight range since it posted an expanded range of $1682.80 to $1634.70 on March 14. From a technical perspective, the trading action can best be described as a series of inside trading days. This is almost a sure sign of impending volatility. Since the main trend is down and “a trend in motion is likely to remain in motion until acted upon by a strong outside force”, traders have to be leaning to the downside.

Based on the main range of $1526.20 to $1792.70, a major retracement zone has been created at $1659.45 to $1628.00. Over the past six days, the April Gold contract has been straddling the 50 percent price level at $1659.45 in an effort to establish support. At the same time, the Fibonacci price level at $1628.00 has not actually been tested with an exact hit, but it looks as if buyers have been coming in slightly above this level. Nonetheless, the buying hasn’t been strong enough to generate even a two-bar swing to the upside.

In addition to the retracement zone, a pair of Gann angles has created a triangle pattern. The fact that April Gold is nearing the apex of this triangle is another sign of impending volatility. The downtrending Gann angle is at $1664.70 today while the uptrending Gann angle comes in at $1638.20. A breakout through either one of these angles is likely to trigger an accelerated move especially since the market has been trading in a tight and narrow range over the past week.

The triangle chart pattern is a non-trending pattern. This means that while the triangle has been forming, the April Gold market has been moving in a sideways manner. If you draw a straight line from mid-January, you’ll see that the market is trading at essentially the same price. Traders by nature don’t like tight ranges. They tend to prefer movement which is why April Gold is likely to move in a big way once it clears the zone that has created the compressed price action.

A break through the uptrending Gann angle at $1638.20 is likely to run into trouble at the Fibonacci price level at $1628.00, but once this level is cleared, April Gold has a clean shot at reaching $1600.00.

On the upside, regaining the bullish side of the 50 percent level at $1659.45 could be a sign of strength, but the market will still have to take out the downtrending Gann angle at $1664.70 to ignite an even bigger move. The most interesting set up occurs on Thursday, March 22 when the downtrending Gann angle and the 50 percent price level form a tight resistance cluster at $1660.70 to $1659.45 respectively. The first test of this cluster may encourage renewed selling pressure, but if this area is overcome by strong buyers then look for an expanded range to the downside.

At this time, all you can do is be patient and allow the market to make its move. The chart pattern suggests impending volatility and the trend indicates a bias to the downside, but traders have to be flexible enough to trade both sides of the market. I don’t expect any “fake out” action so traders have to be prepared to go the way of the move because once the market decides to breakout; volume is expected to rise as traders pile in to support the move.

The June Australian Dollar continued its follow-through to the upside, approaching a key 50 percent price level but not quite touching it before selling off early in the trading session. Based on the main range created by 1.0720 to 1.0314, a key retracement zone has been created at 1.0517 to 1.0565. Last night’s rally reached 1.0511. It is still possible that this zone will be reached, but based on the size of the sell-off, it seems a little remote.

On the downside, the nearest support is an uptrending Gann angle at 1.0434 today. Additionally, the short-term range is 1.0314 to 1.0413. This creates a potential retracement zone at 1.0413 to 1.0389.

Since the main trend is down, I was only expecting a 2 to 3 day retracement equal to at least 50 percent of the last break. The market almost reached this first objective in the allotted time period, but a resistance cluster later this week suggests the market may have more upside potential.

On March 22, a downtrending Gann angle drops in at 1.0560. In addition, an uptrending Gann angle is at 1.0554. Finally, both angles are near a 61.8 percent or Fibonacci retracement level at 1.0565. If the June Australian Dollar makes one more run at the upside, then this resistance cluster is likely to the next upside target.

Although the main trend is down, bullish traders will attempt to form a secondary higher bottom. The first attempt to make this bottom should be on the Gann angle at 1.0434. If this fails, then look for an acceleration down to 1.0413 to 1.0389 over the near-term.

Fundamentally, the June Australian Dollar followed-through to the upside after Friday’s surge. Weak U.S. economic data helped fuel demand for higher risk currencies. This week absence of major economic reports could put greater emphasis on technical analysis and chart patterns.

There was an interesting development between the June Australian Dollar futures contract and the AUD/USD Forex market on Thursday. Both trading instruments rebounded to the upside after testing their respective Fibonacci levels and closed higher, but the AUD/USD had a lower low than the June Australian Dollar. This action produced a closing price reversal bottom, setting up a potential 2 to 3 day rally and a 50 percent retracement of the last break.

Since the Forex market has more volume and the futures contract is a derivative of the Forex market, I’m going to suggest that a breakout over 1.0446 in the June Australian Dollar market is likely to trigger a rally into 1.0512 to 1.0561 by early next week.

This is a counter-trend trade since the main trend is down on the daily chart. A test of the retracement zone created by the break from 1.0720 to 1.0314 is likely to attract selling pressure in an attempt to form a secondary lower top. If this top forms inside the zone, then the market is likely to begin another leg down.

Fundamentally, although most global equity markets have been trending higher, the Australian Dollar has fallen out of favor as a “risk on” currency. Traders could be waiting to see improvements in Australian economic indicators before they get the clarity they need to trade the currency with any confidence.

In addition, the Chinese government’s recent downgrade of economic growth targets, as well as ongoing concerns about Euro Zone sovereign debt are other reasons why bullish traders are shying away from the long side of the Aussie.

Aggressive short-term traders should watch for a quick rally to set up the next shorting opportunity over the next 2 to 3 days. If the market does hit resistance as anticipated then the next break may be labored until the market can clear the retracement zone at 1.0391 to 1.0313.

After turning the main trend down on the daily chart earlier in the week when it broke through a pair of main bottoms at 1.5632 and 1.5636, the June British Pounds have traded sideways-to-higher.

Based on the main range of 1.5240 to 1.5971, the key level that developed into support was the 50 percent level of this range at 1.5606. The actual low for the week is 1.5591. The market is currently trading on the bullish side of this retracement price, giving it a slight bias to the upside on a short-term basis. A failure to hold this level will weaken the market further with the Fibonacci level of this range at 1.5519 the next likely downside target.

Although the main trend turned down earlier in the week, the move did not produce an acceleration to the downside which may be the result of oversold conditions. Standing in the way of a potential rally is an uptrending Gann angle at 1.5660 today. Regaining this level and establishing support could trigger a near-term rally into a downtrending Gann angle at 1.5751.

Short-term traders are going to have to decide whether to trade counter-trend for a quick rally into resistance with an exit under the weekly low, or to hold on to short positions and perhaps even press the market further. Based on the way this market is behaving, this price level is definitely an area of interest.

Yesterday, Fitch Ratings said Britain risks losing its top investment grade because of its limited ability to deal with economic shocks. The rating service changed its outlook on Britain to “negative” from “stable”, indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years. The company cited the weak economic recovery, high debt levels and threats from Europe’s debt crisis as the primary reasons for the change in the rating.

In determining its new rating, Fitch said its decision “reflects the very limited fiscal space to absorb further economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery.”

The warning couldn’t have come at a worse time. Besides grabbling with the slow economy and the sovereign debt crisis in Europe, the U.K. has been going through a rough period of financial austerity which has been highlighted by huge cuts in government spending. Traders will have to determine whether the government will loosen up a little or implement plans to lower taxes in order to stimulate the economy.

The market did not react too much to the Fitch downgrade since Moody’s Investors Service already warned last month that Britain risks losing its top-level credit rating if the economy deteriorates further. In addition, the downgrade did not come as a surprise either since according to a statement from Bank of England Governor Mervyn King on February 29, the Moody’s warning was a “perfectly reasonable” assessment.

Stripping out the fundamental news that appears to have been already priced into the market, traders should focus on the June British Pound’s down trend. This week’s sideways action can only mean impending volatility. This means a potential acceleration to the downside through 1.5591 or a short-covering rally into resistance that is likely to attract fresh selling pressure.

Another week, another liquidation break in May Silver. Unlike the break two-weeks ago, the main trend according to the swing chart turned down today when the main bottom at $32.72 was broken.

In addition to breaking this bottom, the market is also trading on the bearish side of the 50 percent price level of the $26.27 to $37.58 range. This price level is $31.92. The next downside target is the Fibonacci price level at $30.59.

An additional downside target is the uptrending Gann angle from the $26.27 bottom at $30.35 today. Combined with the Fibonacci retracement target, May Silver may trade $30.59 to $30.51 on March 19th.

Although the main trend is down, the market is down 10 market days from the top which makes it ripe for a short-term reversal. One is not forming yet, but short traders should be aware of the current set-up so that they don’t get caught in a bear trap.

The March Euro FX futures contract found support overnight on an uptrending Gann angle at 1.3047. The actual low was 1.3038. Currently the market is hovering over 50 percent of the main range of 1.2637 to 1.3498 at 1.3068.

The 1.3068 to 1.3047 area is the key to the structure of chart. A break under the Gann angle is likely to trigger an acceleration to the downside with a Fibonacci retracement level at 1.2966 the next potential downside target.

Holding the support area could encourage short-covering or attract fresh buying since the main trend is up. In addition, time may become a factor since the market is down 13 days from the last swing top at 1.3498.

If traders do establish support then look for a possible closing price reversal bottom by the end of the day. The first upside target is the downtrending Gann angle from the 1.3498 top at 1.3238.

Fundamentally, the Euro has been trading weaker against the Dollar on the heels of an improving U.S. economy. Friday’s better-than-expected jobs data coupled with Tuesday’s strong retail sales had traders thinking that the Federal Reserve would rein in another round of quantitative easing for the time being.

On Tuesday, the U.S. Federal Reserve didn’t go as far as taking QE out of the equation, nor did it shorten the time its sees as the date easing ends, but it did acknowledge that the economy is growing albeit at a slow pace. Traders took the news in stride and rallied the dollar.

While the U.S. economy is improving, Europe is going through a relatively quiet time period, but this may be the calm before the storm. As sovereign debt turmoil as well as fresh austerity measures continue to take their toll on several Euro Zone economies, traders should look for the downward bias to continue until conditions improve. At this time, the U.S. economy is improving and Europe is being threatened with contraction. This should be enough to keep the Euro on the defensive. Over the short-run, however, oversold conditions may trigger a brief short-covering rally.

Overnight the Bank of Japan released its monetary policy statement. It kept interest rates unchanged at 0 to 0.1 percent. This was no surprise and widely expected. It did, however, overrule a proposal for more stimuli which surprised some traders who were looking for a move similar to last month’s easing. This additional stimulus would have helped amplify the impact of the decision in February that triggered the huge sell-off the March Japanese Yen is experiencing now.

Instead of the additional stimulus, the central bank decided to expand a loan program targeting growth industries. The size of the package is 2 trillion yen or the equivalent of $24 billion. This increased the amount of money available in the program to 5.5 trillion yen.

In order to implement the plan, the BoJ created several new loan arrangements including one that will tap U.S. Dollar reserves for investments and loans denominated in foreign currencies.

The moves by the BoJ seemed to disappoint traders at first, triggering a slight up move in the markets. Traders thought that the central bank had in someway let its foot off the gas peddle. Some traders reacted as if the central bank had made a decision that was destined to erase most of the gains achieved following last month’s decision to ease.

Critics of the BoJ’s decision quickly pointed out that the central bank had missed a golden opportunity to press the Japanese Yen further had it made a decision similar to February’s which hit the market with shock and awe while igniting the start of a sharp sell-off. One pessimistic critic called for an increase in the asset buying and loan scheme by 5 trillion yen to 70 trillion yen, but he was outvoted by 8 to 1.

The action by the BoJ to stand its ground this month was in reaction to an improving economy. It also suggests that the central bank took the right course of action as exports are expected to improve now that the Yen is trading a multi-month lows. It also left open the door for further aggressive easing in April should any glitches develop in the current policy.

After traders were able to digest the report, the March Japanese Yen reversed course intraday and resumed its downtrend. Technically, a new swing top was formed at 1.241. The main trend will turn up when this price is violated. A downtrending Gann angle at 1.2210 is providing additional resistance.

The monthly chart suggests the Japanese Yen is headed toward uptrending Gann angle support at 1.1726 and a key 50 percent price level at 1.1634.

With tensions easing in Europe and conditions improving in Japan, the Bank of Japan appears to have finally gained control of is deflationary economy. It now has the ability to press the Yen lower when it needs to although its weapons seem to be limited. Although it appears to be making the right moves at the right time, the BoJ will face a problem if the U.S. Federal Reserve decides to talk about tightening. With the Fed making its monetary policy decision today, BoJ officials have to be concerned about the U.S. central bank’s decision regarding additional stimulus in the wake of an improving U.S. economy. The conclusion is the Fed will dictate when and how much the BoJ will have to ease in the future.

The March British Pound turned its main trend down on the daily chart when it took out a pair of swing bottoms at 1.5645 and 1.5641. Since the market appears to be slightly oversold, there was no acceleration to the downside which may mean the currency is setting up for a short-covering rally.

Standing in the way of a breakout to the downside was an uptrending Gann angle/50 percent retracement support cluster at 1.5612 and 1.5607. The actual overnight low is 1.5610, suggesting that short traders either took profits or counter-trend traders started to go long at the cluster.

Currently, the British Pound is ping-ponging between a pair of 50 percent price levels at 1.5671 and 1.5607. These prices should act as pivots with the market gaining strength over 1.5671 and weakening under 1.5607. Breaking away from either price level could trigger strong moves since the chart pattern suggests room to rally and room to break.

A breakout over 1.5671 could trigger the start of a rally all the way back to 1.5777 while a breakdown under 1.5607 could ignite a trade down to 1.5516.

An improving U.S. economy helped fuel last week’s late sell-off so additional positive economic news this week should be the catalyst that leads to further weakness. Technically oversold conditions may drive the market higher unless an unexpected weak U.S. economic report encourages short traders to pare their positions.

After Friday’s huge sell-off, the weakness continued in the March Euro overnight with the market piercing last week’s low at 1.3096 and negating the daily closing price reversal bottom.

The overnight sell-off came close to reaching a major mid-point but stopped short of hitting this target. Based on the 2012 range of 1.2637 to 1.3498, the first downside target is the 50 percent price level at 1.3068, followed by the 61.8 percent price level at 1.2966.

Despite the hard break, the main trend remains up according to the daily swing chart. The trend will remain intact as long as the swing bottom at 1.2985 continues to hold. Since the main trend is still up, buyers may begin to step in slightly under the 50 percent price angle at the uptrending Gann angle at 1.3027 on Monday.

Even though last week’s closing price reversal has been negated, time is still indicating that another similar bottom may form. This means that short traders have to remain alert for a possible lower-low, higher-close finish today. Since the market is nearing support, pressing the short-side too aggressively may result in getting caught in a bear trap.

The U.S. government reported today that 227,000 jobs were created in February. The number was better than pre-report estimates of 213,000. In addition, January’s Non-Farm Payrolls number was revised up to 284,000 from 243,000. December’s net hiring was also kicked up a few notches from 203,000 to 223,000. The unemployment percentage held steady at 8.3% as forecast.

The report suggested that the economy was gaining momentum and that this strength was likely to continue over the near-term. Looking at this report from a historical perspective, the pace at which full-time jobs grew over the past three months was the fastest since the end of the 2007-2009 recession. Additionally, today’s report also signified the best performance since early 2006.

The March U.S. Dollar Index soared after the release of the better-than-expected report. On the 5-minute chart, the futures market jumped from 79.55 to 79.74 before continuing on to 79.94. (Fig. 1)

(Fig.1) Daily March U.S. Dollar Index surged on the 5-minute chart immediately on the release of the U.S. Non-Farm Payrolls Report.

The March U.S. Dollar is recovering nicely after nearly completing a 50 percent retracement of its short-term range. Based on the rally from 78.12 to 79.98, expectations were for the index to pull-back to at least 79.05 following a closing price reversal top on Wednesday.

Today’s strong comeback rally has put the market in a position to negate this reversal following a move through 79.98. A trade through this top is likely to trigger a further rally into a 50 percent price level 80.08. Additional upside momentum could drive the market into an old top at 80.24 and finally the Fibonacci retracement level at 80.55. (Fig. 2)

The jump in the Dollar Index coincided with a simultaneous break in the Treasury market. March 30-yr Treasury Bonds and 10-yr Treasury Notes weakened after the number. With interest rates rising slightly because of the friendly employment report, traders are favoring the dollar over the other major currencies.

The U.S. Dollar is trading higher overnight against all major currencies. With details coming out that Greece’s bond swap may have reached the 85% level, making it eligible to receive its second major bailout from European institutional leaders, traders are shifting their focus back to the U.S. Non-Farm Payrolls report due out later this morning.

Financial market traders are pricing in an increase of about 213,000 jobs in February paired with an unchanged unemployment rate at 8.3%. Some pre-report surveys are calling for an increase of 210,000 to 216,000 with the median projection of economists surveyed by Bloomberg News estimating an advance of 215,000.

Hitting the 213,000 mark will put the number of jobs added in February well below the January report of 243,000, but above the December’s 203,000 job increase.

Treasury traders will be watching the report closely in anticipation of expanded volatility. Based on the short-term daily June 30-Yr Treasury Bonds range of 139 15/32 to 143 1/32, a pivot price has been created at 141 8/32. With the market currently trading below the 50 percent level of this range, one can conclude that there is a bias developing to the short side. This can be interpreted to mean that a larger than expected increase in payrolls would put more pressure on the longer-term 30-year Treasury Bonds.

Daily June Treasury Notes are straddling exactly 50% of its short range pegged at130’10 to 131’16.5. This contract will also plunge if the Non-Farm Payrolls number comes out well above the guesses. If the number is precise then a slight bias will develop to the downside. A break through the swing bottom at 130’10 is likely to trigger an acceleration to the downside. A rally through 131’16.5 will do the same on the upside.

It was a good news, bad news week for natural gas futures. First the bad news. Prices continued to fall with the market reaching a new low for the year. The failure to hold the previous low at $2.411 means that the downtrend that was stalled for five weeks has now resumed.

Natural gas prices are trading at their lowest level in 10 years as a mild winter comes to a close with storage facilities left with a huge surplus of the fuel on hand. The lack of demand and a boom in production could mean lower prices to follow as the U.S. enters the warmer spring season.

Prices could drop even further over the near-term with traders eying the $2.00 per 1,000 cubic feet level. Based on normal seasonality, demand is not expected to pick up until the summer when air conditioning usage increases.

Until production declines, natural gas producers face the possibility that storage will reach 100 percent of capacity sometime between the heating and cooling seasons when demand drops significantly.

The preceding was the bad news. The good news can be found on the weekly chart. Although the main downtrend was reaffirmed when the market broke through the most recent swing bottom at $2.411, a new lower swing top was formed at $2.984. This is significant because this is the price level at which the main trend turns to up. The previous breakout or “change in trend” level was $4.338. So while the trend remains bearish, at least traders won’t have to sit through a $2.00 rally before the trend turns up. Besides the swing chart breakout, bottom-pickers should continue to watch for a weekly closing price reversal to signal a short-term bottom and a possible shift in sentiment.

I know it’s way to early, but after its three-month vertical rise, Apple Inc. (AAPL) is beginning to form a monthly closing price reversal top. Although often identified with major tops, this one should it form, is likely to lead to a 2 to 3 month correction of at least 50 percent of the last rally. There are no indications of a trend change at this time.

Based on the current leg measured as $310.50 to $548.21, a key retracement zone has been identified at $429.89 to $401.72. Standing in the way of a freefall into this retracement zone is a long-term uptrending Gann angle at $458.20 this month.

It may be just profit-taking at this time, but as we approach the end of the month, this pattern will take on added significance.

After briefly piercing a downtrending Gann angle at .9175 on Wednesday, the USD CHF closed back below it while posting a daily closing price reversal top. The subsequent follow-through to the downside, confirmed the top at .9201, setting up the currency pair for a potential 2 to 3 day break into a key 50 to 61.8 percent retracement zone.

Today, downtrending Gann angle resistance drops in at .9165. Based on the short-term range of .8931 to .9201, traders should look for the start of a break into .9066 to .9034 over the near-term. Before reaching this downside objective, the USD CHF must take out the uptrending Gann angle at .9111. Once the market clears this angle, it could go into a freefall until it reaches the retracement zone objective.

There are several key points that traders should pay close attention to as this move develops. The first one is identified by the blue arrow which points at a possible support cluster at .9031 to .9034 on March 9. The second is identified by the green arrow which isolates a possible resistance cluster at .9145 to .9151 on March 12. The red arrow recognizes an uptrending Gann angle and Fibonacci retracement level cluster at .9066 to .9061 and .9071 to .9066 on March 14 and March 15.

With the potential top already set in motion, strong downside momentum on increasing volume will be needed to break the uptrending Gann angle at .9131. If this occurs, then traders should look for an acceleration to the downside.

There were no strong fundamental reasons for the shift in sentiment on Wednesday, leading traders to place most of the blame on profit-taking after a solid 8-day rally. Optimism that Greece would settle its bond swap deal and general nervousness ahead of Friday’s U.S. Non-Farm Payrolls report were two other reasons given for the Dollar/Swiss reversal.

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Overnight the March Euro confirmed Wednesday’s closing price reversal bottom when it broke thorough yesterday’s high at 1.3165. Based on the break from 1.3488 to 1.3096, expectations are for the Euro to mount a 2 to 3 day rally to at least the 50 percent level of this range to 1.3292.

For several days the Euro had been walking down a Gann angle at 1.3128, but overnight this angle was gapped putting the market in a slightly bullish position. Now that the Euro is trading on the bullish side of this downtrending Gann angle, the market may make an attempt to reach another downtrending angle at 1.3308 today.

Although a rally to this angle seems remote, there is room to the upside. This same angle drops to 1.3288 on Friday, March 9, forming a potential resistance cluster with the 50 percent level at 1.3292. (See Arrow)

On the downside, the March Euro stopped near an uptrending Gann angle on Wednesday. The angle came in at 1.3105, the actual low was 1.3096. Either short-covering or bottom-pickers came in at that point to form the closing price reversal bottom. On Thursday this angle moves up to 1.3115 and is still considered to be key support. A break through the closing price reversal bottom will negate the chart pattern and likely trigger an acceleration to the downside.

Fundamentally, the Euro rallied against the Dollar on Wednesday as confidence grew that the private-sector would participate in the Greek bond-swap deal. As mentioned in the technical comments, it was either profit-taking from the Euro’s long slide or some light bottom-picking that helped turn the market around.

Given the uncertainty of the Greek bond-swap deal, the European Central Bank meeting on Thursday and Friday’s U.S. Non-Farm Payrolls report, it doesn’t look like institutions are participating in the markets in a major way this week. This is one of the reasons why the Euro ping-ponged between a pair of retracement zones.

Although the market appears to be a little more optimistic that Greece will reach a PSI participation level of 66% and thus prevent a complete collapse of the debt deal, traders note that volatility may be expanded if Greece enforces the collection action clause triggering credit default swaps.

The final potential market mover is the European Central Bank’s monetary policy decision. The consensus is the central bank will keep interest rates unchanged at 1.00 percent and maintain its “wait and see” outlook. ECB President Draghi’s press conference may prove to be interesting as he will no doubt be faced with questions regarding a possible Greece default, the contraction in the European economy and last week’s relatively large interest by banks in the central bank’s low interest rate borrowing program.

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After breaking through an uptrending Gann angle this morning at 1.3215, the March Euro continued to break until it found support near a Fibonacci retracement level at 1.3171. The actual low was 1.3161. The subsequent rally has put the Euro in a position to regain the 50 percent price level at 1.3232.

In addition to the 50 percent price level, downtrending Gann angle resistance drops in at 1.3248, making 1.3232 to 1.3248 a “loose” resistance cluster. Breaking through this cluster will put the market on the bullish side of the uptrending Gann angle at 1.3215.

If the Euro can continue to hold this angle over the next two days then the single currency will be in a position to test a downtrending Gann angle from the 1.3488 top at 1.3328 on March 7. This price is important because it will form a resistance cluster with another 50 percent price level at 1.3324.

With little conviction on either side of the market, the Euro was able to reverse its earlier downtrend to post a slight gain. Earlier in the trading session, traders were pressuring the Euro in reaction to the news that China was planning to slow its growth this year. This news drove down demand for higher yielding currencies. The subsequent turnaround in the Euro is being credited to short-covering and light bottom-picking ahead of Greece’s planned debt holder’s swap and the U.S. monthly Non-Farm Payrolls report on Friday.

Traders may have to endure choppy two-sided trading this week according to the chart pattern since the Euro is trading between a pair of retracement zones. In addition, uncertainty ahead of the U.S. employment report may cause institutional traders to remain on the sidelines until they receive some clarity.

Without any apparent breakout opportunities on the daily chart, traders are likely to rely on precise support and resistance levels to trigger their trading opportunities.

The March Australian Dollar is trading weaker overnight after failing to take out the high for the week at 1.0883. The subsequent turnaround could pressure the market later today. The daily chart indicates that a trade through 1.0693 will confirm a closing price reversal top formed earlier in the week.

Based on the short-term range of 1.0569 to 1.0833, expectations are for the Aussie to find short-term support at 50 percent of this range at 1.0701. This is followed by an additional retracement level target at the Fibonacci level of 1.0670. Before the market can reach this level, however, it must break a minor uptrending Gann angle at 1.0689.

Besides the closing price reversal top which usually indicates the start of a 2 to 3 day break once it is confirmed, the Australian Dollar may also be forming a minor triple top. This pattern will be verified if the market breaks the swing bottom at 1.0569.

In addition to confirming the triple top, a failure to provide support at 1.0569 will mean the daily main trend has turned down. Looking at the major range of 1.0065 to 1.0833 for guidance, traders may try to break into the retracement zone of this range at 1.0449 to 1.0356. This is followed by an uptrending Gann angle target at 1.0263. This angle will cross the lower retracement price target at 1.0356 on March 16. A test of this price at that time will square price and time and could trigger a technical bounce to the upside.

Earlier in the week, the Australian Dollar reached a multi-month high versus the U.S. Dollar because of an improving growth outlook. In addition, the strong interest in the European Central Bank LTRO program spurred fresh demand for higher yielding assets.

The potentially bearish closing price reversal top formation put a short-term negative spin on the Aussie after U.S. Federal Reserve Chairman Ben Bernanke failed to convince traders that another round of quantitative easing was in order. This news caused speculators to pare their long positions. Although the technical charting pattern may be indicating a possible break, traders appear to be waiting for more economic news from the U.S. as well as indications that the turmoil in the Euro Zone is settling.

Next week the Reserve Bank of Australia meets to decide its interest rate policy. Expectations are for the central bank to leave interest rates at 4.25 percent, but hint that it will likely raise rates at its next meeting if global economic conditions continue to improve. The RBA will also base its decision on how it perceives risk and most analysts agree that risk may be lessening now that Greece has received its bailout money and while the ECB continues to provide liquidity when needed.

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After posting a closing price reversal bottom on Monday at .9945, the March Canadian Dollar surged to the upside Wednesday, taking out the last swing top at 1.0090 and reaffirming its current uptrend. The strong close put the currency in a position to challenge the September 11 top at 1.0187.

Overnight the Canadian Dollar is trading inside of yesterday’s range. A failed test of the uptrending Gann angle at 1.0135 pulled the market back inside of the channel up chart pattern created by a pair of uptrending Gann angles at 1.0045 to 1.0145 today.

The combination of the uptrending channel and the series of higher-tops and higher-bottoms mean that the trend is strong. The first sign of weakness will be a close under the lower-boundary while a change in trend to down will occur following a penetration of the swing bottom at .9945.

Traders should continue to look at the long side of the market until support is violated; however, they should remain cautious about buying strength because of the possibility that selling pressure will emerge following a test of the September 2011 top at 1.0187.

Fundamentally, a combination of end-of-the-month buying along with optimism over the fresh injection of liquidity by the European Central Bank helped fuel Wednesday’s surge. However, traders backed away from triggering a complete breakout to the upside because of comments from U.S. Federal Reserve Chairman Ben Bernanke. Testimony by the Chairman seemed to indicate the Fed was not considering another round of financial stimulus.

Next week the Bank of Canada will meet to decide its bench mark interest rate. Monetary policymakers have been holding rates steady at 1.00 percent since September 2010 because of European concerns despite the fact that the country’s annual inflation rate has exceeded the central bank’s 2.00 percent target for 14 straight months.

Expectations are for the central bank to continue to keep interest rates low as long as risk continues to exist in the global marketplace and the markets are able to absorb the excess liquidity.

Longer-term trend traders should continue to monitor the uptrending channel for guidance. Shorter-term traders may have to rely on breaking news to generate action since this currency has had a tendency to become rangebound

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Overnight the March Japanese Yen confirmed Monday’s closing price reversal bottom, but the lack of follow-through has set up the market for a near-term correction. Based on the short-term range of 1.2256 to last night’s high at 1.2499, traders should look for a corrective move back to 1.2378 to 1.2349.

The Japanese Yen must make a successful test of this retracement zone if it is going to form a secondary higher bottom. This type of bottom is often indicative of a shift in sentiment. Professional traders seldom try to pick bottoms. Typically, the first rally off of a bottom is short-covering. The first retracement usually attracts new buyers because they have the closing price reversal bottom to lean on. In other words, their exit if they are wrong is a new low.

A successful closing price reversal bottom usually leads to a 2 to 3 day rally equal to at least 50 percent of the last break. Based on the move from 1.3160 to 1.2256, a renewed follow-through rally could take the market back to 1.2708 to 1.2815 over the near-term.

Besides the retracement zone, traders should watch for resistance on the first test of 1.2609 because “old bottoms tend to become new tops”. Additional resistance is at 1.2685 which is a downtrending Gann angle from the 1.3160 main top. Other technical reasons for a possible bottom are oversold RSI and Stochastic indicators.

Fundamentally, traders are saying the March Japanese Yen rallied on speculation that Japanese exporters were taking advantage of recent declines to bring home overseas earnings. Additionally, traders are looking for additional upside action since some Japanese companies and investors will need to repatriate earnings by the end of the fiscal year on March 31. This event is expected to trigger fresh demand.

The combination of a potentially bullish technical bottom and the need to repatriate could be the catalyst the Japanese Yen needs to retrace at least half of its recent break.

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The GBP USD closed higher after selling pressure failed to drive the market into a 50 percent retracement level at 1.5580. The strong finish gave the market a bullish bias while putting it in a position to challenge a retracement level at 1.5925 and a minor top at 1.5928.

Based on the main range of 1.6618 to 1.5233, the retracement zone at 1.5925 to 1.6089 is this week’s first upside target. Since the main trend is down, traders should watch for possible selling pressure to develop inside of this zone.

Uptrending Gann angle support is at 1.5793 this week. This angle could control the short-term direction of the market. On the upside, a downtrending Gann angle at 1.6058 could become resistance if tested. This angle also pierces the retracement zone and actually forms a resistance cluster with 1.6089.

A breakout may occur over the resistance cluster, but traders should know that the main trend will not turn up on the weekly chart until the swing top at 1.6165 is penetrated. Besides the close near the high of the week, the British Pound also closed over a downtrending Gann angle at 1.5825. This is another sign that a bullish bias is developing. This assessment will change if the uptrending Gann angle at 1.5793 fails to hold as support.

After three weeks of consolidation, the EUR USD blasted off to the upside, closing slightly better than a key 50 percent retracement level. Based on the weekly main range of 1.4247 to 1.2623, the first upside target was 1.34350. Now that the market has regained this level, the market may straddle this price this week in an effort to establish support. If buyers can accomplish this, then the next upside target will be the 61.8 percent level at 1.3627.

The uptrending Gann angle which stopped the break two weeks ago moves up to 1.3083 this week. This angle may act as a guide for the Euro, or it may be tested as support. Breaking through this level will be the first sign of weakness.

A downtrending Gann angle from the 1.4247 top comes in at 1.3527. Not only does this angle split the retracement zone, but it also serves as a potential upside target. Taking out this angle could trigger an acceleration into the 61.8 percent retracement level.

One sign of extreme strength will be regaining a steep uptrending Gann angle at 1.3743. If the market can establish support at this price, then it is likely to accelerate into the next downtrending Gann angle at 1.3887.

The 50 to 61.8 percent retracement zone is an upside objective for many traders especially since the main trend is down on the weekly chart. This means that bulls and bears are going to battle between 1.3435 – 1.3627 this week. Long traders need to pay close attention to the price action inside of this zone because selling pressure may overcome buying pressure, putting the Euro in a position to weaken. On the other hand, re-establishing support at 1.3435 will be a strong sign that sentiment has shifted to the upside.

The March Japanese Yen is currently testing its October 31, 2011 low at 1.2609. This bottom was created following a massive intervention by the Bank of Japan. After posting the bottom, the Yen firmed and retraced a little than 50 percent of the 1.3279 to 1.2609 range. About three weeks ago it reached a high of 1.3160, causing some concerns among Japanese officials who used a verbal intervention to stop the rally.

On February 13, the Bank of Japan surprised the market when it announced it was increasing its asset purchasing program. In addition, it set an “inflation target” at 1.00 percent. The move by the central bank is designed to strengthen the economy which is wallowing in deflation.

Typically, a central bank tries to prevent its economy from growing too rapidly; however, the action by the BoJ is an effort to give the Japanese economy a jolt. While the move by the BoJ seems aggressive, it had to be done to keep up with the U.S. Federal Reserve’s decision in January to keep interest rates at extremely low levels until late 2014. In fact, the two central bank policies are similar except that the Fed usually sets a time limit while the BoJ bases its exit strategy the economy’s performance.

If this week’s selling pressure can be sustained, then a break through the October bottom at 1.2609 is likely to trigger a further decline to a major 50 percent price level at 1.2519. Additional support is expected to come in at the 1.2500 psychological support price. Since these prices form a solid support cluster, expectations are that short traders will begin to take profits and bottom-pickers may even emerge so traders should be on the lookout for a possible technical bounce to the upside.

If downside momentum continues, then look for the old bottom and 50 percent level to become new resistance. The downside targets would then change to 1.2340 to 1.2334. This scenario could take place if the Bank of Japan decides to get more aggressive on the weakness and perhaps perform an intervention.

The sudden shift in sentiment late in the trading session on Thursday’s has created a confusing chart pattern for March Euro traders. One scenario identifies a change in trend to down on the daily chart while the other suggests the formation of a new bottom and the start of another leg to the upside.

The swing chart which is also known as the trend indicator turned down on Thursday when the Euro pierced the last swing bottom at 1.3027. The subsequent late session rally did not change the trend back to up, but the upside momentum was strong enough to suggest that the short-covering rally is likely to continue on Friday. Despite the strong close, the main trend will remain down unless the swing top at 1.3325 is violated.

Shortly after its main trend turned down, the Euro reached the 50 percent level of the major range created by the January bottom and the February top. This range is 1.2627 to 1.3325. The 50 percent level is 1.2976 and Thursday’s low was 1.2975. Whether it was bullish news regarding Greece’s debt crisis or huge buyers waiting to cover their short positions and reverse to the long side, the Euro embarked on an impressive retracement.

The strong close helped form a minor closing price reversal bottom which is often a sign that a major bottom may be forming. The only issue I have is that this type of bottom often occurs following a prolonged move down in terms of price and time. In this case, the market did reach a 50 percent level, but a 5 day break is hardly a “prolonged move”.

If you believe that Thursday’s reversal was enough to knock the short-traders out of the market and that sentiment is shifting back to the upside, then the first sign you should be looking for is a follow-through rally. This will occur if the Euro breaks through Thursday’s high at 1.3161. If this confirmation takes place then one has to call 1.2975 a valid bottom.

A valid closing price reversal bottom often retraces at least 50 percent of the last break within 2 to 3 days of its formation. The strength of the retracement has already reached this level at 1.3150. This makes the 61.8 percent level at 1.3191 the next likely target. Finally Gann angle resistance drops in at 1.3205, creating a resistance cluster between 1.3191 and 1.3205.

In my opinion, the daily Euro chart is still suggesting trader uncertainty. And what better to confirm this assessment then to have the market trade in between a pair of retracement levels at 1.3150 and 1.3191. This area seems to be the pivot zone that traders will use to decide whether to take the market back up or resume the newly initiated downtrend.

Thin trading conditions may also be contributing to the uncertainty since big money is unsure about which direction to take and may be on the sidelines. This gives me the opportunity to lay the blame for the choppy price action on sloppy, undercapitalized traders who caved in when the market broke, but then chased it higher when a positive news story leaked about Greece. Traders should expect more of the same trade on Friday since there is nothing fundamentally available to allow investors to position themselves with clarity and conviction.

Friday’s sell-off in the March Euro was impressive, but the market was still able to close higher for the week, so for the time being all three time periods – monthly, weekly and daily still have an upward bias. Last week’s rally also took out a daily swing top at 1.3237. This action confirmed the January closing price reversal bottom at 1.2627.

The daily chart suggests the Euro has reached a critical decision point for traders. The short-term range is 1.3027 to 1.3325 with the mid-point of this range at 1.3176. Combined with an uptrending Gann angle from the 1.3027 bottom at 1.3167, this cluster stopped the break on Friday. You can find it on the chart too. Just look where the 50 percent level crossed the uptrending Gann angle.

On Monday the 50 percent level will remain the same, but the Gann angle will move up to 1.3187. The Euro will have to hold this angle to maintain its upside momentum. If you break it down further, the market has formed a new range that is probably better seen on the intraday charts. This range is 1.3325 to 1.3157. The mid-point of this range is 1.3241. Look for this price to act as a pivot today: Bullish Above and Bearish Below.

Until something concrete comes out of Greece regarding its debt resolution package, the Euro may be locked inside of a tight range. This isn’t necessarily a bad thing since it often leads to volatility. So while the market sits inside of a tight range, perhaps forming a non-trending pattern like a triangle on the intra-day charts, traders should brace for upcoming volatility.

After closing near its low on Friday, the Euro rebounded with a higher opening Sunday night. This strength didn’t hold as the market has given back much of its early gains. The primary reason for the early session “euphoria” was the news that Greece’s parliament approved a package of austerity measures over the week-end. This move proved to be unpopular with the Greek citizens, but traders seemed to approve although the early “pop” was probably short-covering rather than new buying.

While some traders feel that the approval of the austerity measures provides a straight path toward getting the bailout money to avoid default, the key concern remains implementation of the programs. So for the time being, traders are going to factor in the possibility of a Greek default and the remote possibility that it will be booted out of the Euro Zone. The price action doesn’t suggest the latter, but over the near-term traders should keep an eye on the news to see if any EU politicians, in an effort to express frustration, begin to suggest that this idea is on the table.

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Overnight, the March Australian Dollar futures contract touched a high not seen since late July after the Reserve Bank of Australia surprisingly kept its benchmark interest rate at 4.25%. Economists had been expecting another cut from the central bank.

Steady growth and an optimistic outlook for inflation were the key contributing factors to the decision. The monetary policy statement included the line, “with growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy was appropriate for the moment.”

Bucking the trend it created when it made quarter-point rate cuts at its last two meetings of 2011, the Australian central bank decided at its first meeting of 2012 to leave interest rates unchanged. The market was swift to react as it pushed futures prices to their highest levels since the nearby futures contract reached a top at 1.0789 on July 27, 2011.

Besides growth and inflation, the RBA also mentioned the financial pressures on European banks. After expressing worries about the European banking situation in 2011, the central bank said “Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made.”

By reducing the fear of a global economic meltdown, the RBA was able to concentrate its analysis on factors directly affecting the Australian economy. “Information on the Australian economy continues to suggest growth close to trend, with differences between sectors, according to RBA Governor Glenn Stevens. He also added that over the next one to two years, underlying inflation is expected to fall within the bank’s 2.00 percent to 3.00 percent target range.

Although Stevens believes that the key to futures rate cuts depends on whether inflation has been tamed or not, he knows that he now has room to adjust the monetary policy in the future as he sees fit. He also acknowledges that he must continue monitor the financial and economic landscape and “adjust the cash rate as necessary to foster sustainable growth and low inflation.”

Some analysts are interpreting the above statement to mean that the RBA board has adopted a dovish bias and that Tuesday’s decision to keep rates unchanged was merely a short-term pause to gauge the situation in Europe. This is most likely because since its last meeting, the Euro has bottomed, the European Central Bank has held interest rates steady and the outlook for a solution to the Greek debt crisis has improved.

Although the U.S., Japan and the U.K. are all holding interest rates at near zero, the RBA feels it needs more time to assess the situation. Based on the surge in prices, Australian Dollar traders do not seem to be too concerned that interest rates will decline over the near-term despite forecasts of a 3.50 percent cash rate by mid-year.
Technically, the March Australian Dollar is in the midst of a powerful uptrend. Since bottoming at 1.0065 on January 9, the Aussie has not had two-consecutive lower-lows. Although this indicates strength, it should also serve as a key topping indicator should the pattern begin to change. Traders should also begin to monitor short-term momentum indicators for signs of a slowdown in the rally.

The March Euro futures contract is under pressure this morning, but still holding above last week’s low at 1.3027. In fact, the market remains inside of a six day range formed by the January 27 top at 1.3237 and the February 1 bottom at 1.3027. The mid-point of this range is 1.3132. This price level should act as a pivot over the short-run. At this time, the single currency is on the bearish side of the tight formation.

The longer the Euro stays inside this tight range, the more anxious traders will become and the more likely there is going to be a volatile breakout. The direction cannot be determined at this time. Although the main trend is up on the daily chart, today’s action suggests there is a growing bias to the downside. Traders should refer to the pivot price mentioned earlier to gauge trader sentiment.

Two other important ranges are currently controlling the short-term direction of the market. The first is the main range created by the December 2 top at 1.3561 to the January 13 bottom at 1.2627. The retracement zone created by this range is 1.3094 to 1.3204. The upper level of this range stopped the market 6 out of the last 7 days. Today’s action has taken out the lower end of the retracement zone, putting a bearish spin on the Euro.

The next important range was formed by the January 13 bottom at 1.2627 and the January 27 top at 1.3237. The retracement zone of this range is 1.2932 to 1.2860. This 50 percent to 61.8 percent zone is the next major downside target.

Accompanying these two retracement zones is downtrending Gann angle resistance at 1.3121 and uptrending Gann angle support at 1.2947.

Fundamentally, uncertainty over a resolution to the Greece debt crisis has re-entered the minds of traders, threatening to unravel January’s entire rally. Traders fear that Greece will not accept the strict terms of a new bailout deal needed to avoid a potential sovereign debt default. With debt repayments due in March, the Greek government is under tremendous pressure to agree to the new austerity terms that include wage cuts.

The slow progress is encouraging long traders to pare their positions. In addition, a few members of the European Union are starting to worry that the inability to reach a decision will undermine investor confidence, leading to similar financial market turmoil seen throughout the fall.

The severity of the situation should be judged by how fast traders have been able to erase from their memories the good news generated by Friday’s bullish U.S. jobs data. Today’s weakness suggests that Euro traders are more likely to act first and ask questions later.

After surging to 1.0026, its highest level since late October, the March Canadian Dollar is taking a two-day breather. The trading activity may be related to uncertainty regarding the outcome of the European Union/Greece debt negotiations, but it is most likely linked to this morning’s U.S. Non-Farm Payrolls report.

Technically, the main trend is up with no threat of a change in trend to down although there is room for a sizable correction. Based on the short-term range of .9711 to 1.0026, the nearest 50 percent to 61.8 retracement zone is identified as .9868 to .9831. This is the next possible downside target should the U.S. jobs number prove to be bullish for the Greenback.

This morning, the Canadian Dollar is currently straddling an uptrending Gann angle at .9966. This angle should act as a pivot price. The old top from December comes in at .9923. This may be minor support as old tops tend to become new bottoms. Another uptrending angle from the .9675 bottom is at .9865 today. This angle is not likely to be tested today unless there is an extremely volatile break. For the record, this Gann angle combined with the 50 percent level form a possible support cluster at .9868 to .9865.

On the upside, taking out the recent high at 1.0026 could launch another move to the upside with the October 27, 2011 level top at 1.0075 the next target. The uptrending angle at .9966 today should serve as a guide.

Like most higher-yielding currencies, the March Canadian Dollar is enjoying the benefit of the “risk-on” trading scenario. The recent surge to the upside is directly related to its favorable interest rate differential. With the U.S. Federal Reserve recently saying interest rates would remain at ultra-low levels until late 2014, investors flocked to the higher-yielding Canadian Dollar, sending it to multi-month highs. As long as liquidity is free-flowing, sentiment should favor the Canadian Dollar over the U.S. Dollar.

If financial conditions in Europe turn bad and this fresh liquidity is used to put out fires rather than encourage growth then sentiment may shift back to a “risk-off” scenario. This would lead to a liquidation break in the Canadian Dollar.

Although this morning’s Canadian jobs data showed employers added fewer jobs last month than economists forecast and the unemployment rate unexpectedly increased, the Canadian Dollar’s strength is likely to be related to the U.S. Dollar’s weakness.

Entering February traders have two choices. They can either start the month with selling pressure that may retrace 50 percent of the January rally or even further, or they can take out last month’s high at 1.3233 and trigger another rally into the major retracement zone at 1.3781 to 1.4055. The chart picture has been laid out clearly, but the number of traders still pressing the market indicates that the Euro is still under the control of the short traders. It seems like it is going to take an event or a series of events to get this market rolling to the upside once again.

The EUR USD closed February by posting a monthly closing price reversal bottom. This chart pattern has the potential to launch the start of a 2 to 3 month rally equal to at least 50 percent of the last break. The key is the follow-through rally this month. Without it, the pattern will not be confirmed and the market will likely retest the January low.

In order to start the launch sequence the Euro has to trade through last month’s high at 1.3233. A trade through this level is expected to trigger further short-covering and additional buying as traders will gain confidence that a major bottom has been formed. In January the Euro bottomed on an uptrending Gann angle at 1.2636. This month the angle moves up to 1.2676. This angle is the key support this month.

Even if the market does confirm the closing price reversal bottom, the market will not have a clear shot at the 50 percent retracement level. It will first have to take out a resistance cluster formed by an uptrending Gann angle and a downtrending Gann angle. These angles form an “x” this month at 1.3476 and 1.3500 respectively.

If upside momentum builds as expected and the previously mentioned resistance cluster can be overcome then traders should look for a test of 50 percent of the main range 1.4940 to 1.2623. This key price level is 1.3781. Further buying power may even drive the market into a Fibonacci price level at 1.4055.

The bottom was formed in the Euro in January after a series of events encouraged bearish traders to curtail their selling pressure and weak shorts to cover their positions. As the rally progressed, larger traders most likely pared their open short positions, but for the most part they maintained their bearish posture. The recent Commodity Futures Trading Commission Commitment of Traders Report showed that shorts still maintain a large position and appear to be in control of the Euro’s long-term direction.

One event that helped form the bottom in the Euro was the European Central Bank’s decision to leave interest rates unchanged at 1.00 percent. This was against most analyst forecasts and helped trigger the start of a strong short-covering rally. Most of the selling pressure witnessed earlier in the month can be attributed to the notion that traders believed the Euro Zone was headed toward a recession and perhaps a financial calamity.

The fact that the central bank held rates steady and ECB President Draghi was able to stabilize the market with his positive rhetoric also contributed heavily to the bottoming action in the Euro.

Also taking place while the ECB was busy stabilizing the European financial markets was an important Italian bond auction. Demand was better than expected which was a sign that investor sentiment may be turning a little more optimistic. With interest rates stabilizing for the time being, short Euro traders seized the opportunity to take profits, helping the market to bottom.

For the first few weeks of the month, rumors swirled that the major debt rating services were poised to announce downgrades of several European sovereign nations. This was also a major contributor to the rapid decline the Euro experienced in early January. When the news came out on January 13 that France was downgraded, traders reacted by selling the Euro. When the dust cleared that day, the market had recovered from the breakdown as traders seemed to realize that this event had already been priced into the market. This proved to be the final contributing factor to Euro’s bottom.

Shortly after bottoming, the Euro began to rally on the news that the European Union and Greece were getting close to finalizing its debt structure plan. As the two parties negotiated, optimism increased that a solution would be found soon. As of the end of the month, however, nothing concrete was in place, but the parties were still talking. Since talks between the EU and Greece have been ongoing for several months, it’s a coin-toss as to whether the market will react positively to the announcement of a deal. If anything, there is likely to be a fast short-covering rally and traders will move on to the problems in Italy and Spain.

The final leg in the Euro’s rally in January was triggered by the U.S. Federal Reserve’s announcement that interest rates would remain at historically low levels until late 2014. This greenlit demand for higher risk assets and crushed the U.S. Dollar. At month’s end the Euro rally was showing signs of running out of steam on the heels of weaker U.S. economic data.

The March Euro futures contract is trading lower overnight after testing Fibonacci resistance for the fifth consecutive day at 1.3204. On the downside, the 50 percent retracement level of the 1.3581 to 1.2627 at 1.3094 is the key support. Both of these levels have taken on the characteristics of a pivot price. In other words, a trade above 1.3204 is likely to attract the attention of bullish traders while a trade through 1.3094 will be noticed by the bears.

The uptrending Gann angle at 1.3187 today also seems to be attracting some trading activity. This angle held as support for almost two weeks but now the Euro is trading on its weakside. Until it pulls away from this angle, continue to look for it to act like a pivot price. This angle combined with the Fibonacci level form an important resistance cluster at 1.3204 to 1.3227 on Friday.

A downtrending Gann angle at 1.3141 is also in the picture today. A break under this level will be a sign that the market is turning bearish. If short traders begin to press the market under this level then the next downside target will be an uptrending Gann angle at 1.2907.

Based on the short-term range of 1.2627 to 1.3237, the 50 to 61.8 percent retracement zone at 1.2932 to 1.2860 is a potential downside target. This 50 percent level of this range combined with the previously mentioned uptrending Gann angle forms an important support cluster at 1.2927 to 1.2932 on Friday.

On the upside, a breakout above the most recent swing top at 1.3237 will reaffirm the uptrend on the daily chart and confirm the closing price reversal top on the monthly chart. This could trigger an acceleration to the upside with a downtrending Gann angle at 1.3351 the potential target.

Fundamentally, the Euro is down versus the U.S. Dollar because the European Union is struggling to reach an agreement with Greece. EU officials are trying to negotiate a deal with Greek bondholders on cutting the nation’s debt burden. The long process has triggered some concern among Euro traders who feel the Euro Zone economy is at risk if a deal isn’t passed soon.

Traders appear to be growing weary over the Greek deal. The process has been going on for weeks and the optimism that was built early seems to be waning. Traders seem poised to put risk back on, but are becoming more tentative with each test of the recent high. Adding to the indecision is Friday’s U.S. Non-Farm Payrolls report. Traders may not want to pick a side in the market going into this report. This may lead to a choppy two-sided trade today.

Weak U.S. economic data is triggering a flight-to-safety rally, driving investors into the March Japanese Yen. After meandering inside of a tight range for several months, the Yen finally broke through the November 18 top at 1.3101, sending a message to Japanese officials that speculators may be preparing to mount a challenge of the October 31 intervention high at 1.3279. So far Japanese officials have been silent on the matter, but there is no doubt that the rise in the Yen is a concern especially since the high priced currency has wreaked havoc on the country’s export industry.

Like most interventions, the October intervention was destined to fail. Depending on its size, it just takes time for the market to absorb the move. In 2011 the Japanese government made two major interventions. The first occurred in March 2011 shortly after the Tsunami. This was absorbed by July 2011, or after four months. The last intervention was on October 31, 2011. If it follows the same four month cycle then by the end of February the Japanese Yen may be challenging the October top at 1.3279.

Long speculators should be aware that although the technical picture on the charts suggests no visible resistance, the Japanese government is most likely preparing a series of “verbal” interventions in order to scare weaker longs out of the market.

Besides moving to the Yen for safety, overnight traders bought the currency after the Small Business Confidence Index in Japan moved from 45.6 in December to 45.7 in January. Gains may have been trimmed by the news that Japanese housing starts fell 7.3% (YoY) in December. Finally, Japanese Finance Minister, Jun Azumi warned that he would take “decisive steps” if the movement in the Yen becomes too volatile or if prices rise too rapidly over a short-term time period.

Technically, the former main top at 1.3101 is now the new support. If this price level fails, then the next support level is 1.3023.

Optimism over a possible breakthrough in the debt restructuring negotiations with Greece sent the Euro higher overnight leading to spillover strength in the March British Pound. Coupled with the news that U.K. consumer confidence rose to the highest level in seven months in January, the British Pound soared to the upside during the European trading session. Due to its strength, traders are anticipating a higher U.S. opening.

Technically, after three days of sideways trading, the March British Pound succumbed to the threat of impending volatility and surged above a key 50 percent price level at 1.5671. The upside momentum was so strong that the market continued the rally until it tested the 61.8 percent retracement level at 1.5777. Not only is the market breaking out over the Fibonacci retracement level, but it is also taking out a pair of former swing tops from November and December at 1.5758 and 1.5761. This move further supports the idea that the main trend has turned to up on the daily chart.

Now that a firm uptrend has been established for the day, traders should watch for at test of the downtrending Gann angle at 1.5805. If the market can maintain its strong upside momentum, then traders should start to plan for a possible attack of the slow-moving downtrending Gann angle at 1.5963.

Since the market is trading on the bullish side of a key 50 percent price, then traders should look for support to form at 1.5671. In addition, the market has also been walking up a steep uptrending Gann angle since bottoming at 1.5222. This angle moves to 1.5702 today. As long as the British Pound can maintain its current upside pace of about .004 pips per day then traders should consider it to be in a position to move higher. The first break of this Gann angle will be a sign that momentum is shifting to the downside.

The U.S. Dollar is trading higher against the Swiss Franc for the first time in several days as weakness in the Euro is dragging down all higher-yielding currencies. This morning’s weakness in the Euro is being blamed on position squaring ahead of this week’s European Union leaders’ meeting in Brussels. In addition, there are some fresh concerns that the Greek bailout negotiations have stalled.

Traders are also watching the upcoming Italian bond auction. The last auction was well-received but this one is coming after a downgrade by Fitch Ratings. The issues regarding Greece surround the need for a bigger rescue package and the possibility of a direct intervention by the European Union into Greek budget decisions. Weaker global equity markets are also encouraging traders to pare long risky asset positions.

Following last week’s dovish tone by the U.S. Federal Reserve in its monetary policy statement, the U.S. Dollar fell sharply against most major currencies. This likely means that after a short-term set-back, the March Swiss Franc will renew its uptrend.

Technically speaking, the March Swiss Franc turned its main trend up on the daily chart following a trade through the former swing top at 1.0762 on January 23. On Friday, the strong rally stalled at 1.0979. This means the rally fell short of a resistance cluster of Gann angles and retracement levels at 1.0991 to 1.1070. Based on the main range of 1.1700 to 1.0431, a key retracement zone was created between 1.1066 and 1.1215. Downtrending Gann angle resistance is at 1.1070 while an uptrending Gann angle arrives at 1.0991.

Now that a short-term range has been formed between 1.0431 – 1.0979, traders should anticipate a possible retracement into 50 to 61.8 percent of this range to 1.0705 – 1.0640. In addition, uptrending Gann angle support can be found at 1.0711 today, making 1.0711 to 1.0705 an important support cluster.

With the main trend up and the market set-up for a near-term retracement, traders should look for a fresh buying opportunity if the currency corrects into 1.0705 to 1.0640 as expected.

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Last week’s climactic closing price reversal bottom in March Natural Gas may be signaling the start of a 2 to 3 week rally equal to at least 50 percent of the last break from 3.7410 to 2.2890. Depending on whether this market can set up a solid support base, this may develop into a long-term bottom but traders are going to have to be patient. Since the height of the market is determined by the length of its base, it could take weeks or months to set up the proper bottom.

At this time, aggressive buyers may be able to catch a quick rally into the first retracement zone, but do to the bearish nature of the fundamentals; it is a bit premature to be thinking about a change in trend. The first sign that the trend is turning up on the daily chart will be a move through the most recent swing top at 3.7410. Even if this occurs over the short-run, it is far more important that this market form a “W” bottom or support base, or the rally is likely to fail somewhere down the road.

Besides the 50 percent price level target, upside momentum may drive this market into the Fibonacci or 61.8 retracement level at 3.1860. Furthermore, although the market appears to be shedding a pair of long-term downtrending Gann angles at 2.5550 and 2.6720 this week, it may still run into fresh selling pressure at another downtrending Gann angle at 3.0210. Based on all of these potential scenarios, traders should recognize that any rally is likely to be labored.

Traders should also keep in mind that the formation of a closing price reversal bottom does not mean that a major bottom has been formed or even that the trend has changed to up. The key is the follow-through rally the next week through the previous week’s high. Markets make lower-lows and higher-closes all of the time without ever following through on the pattern. Traders should keep this in mind to prevent random buying that ultimately ends in failure.

This being said, March Natural Gas has to trade through 2.8380 to confirm the pattern and set it on course for the first objective at 3.0150. Increased volume and volatility will also be needed to create the upside momentum needed to complete the objective of the pattern.

Fundamentally, a short-covering rally was triggered last week by President Obama during his State of the Union address after he threw his support behind developing the natural gas industry. This made natural gas producers happy, but in reality they still face a tough road ahead because consumption still lags grossly behind production. Last week Chesapeake Energy announced it would be curtailing production, but unless other producers follow suit, crude oil storage capacity could reach 100% by May.

Keep this in mind before committing 100% to the long side. Let the market news play out and let the market form the necessary support base. Typically, the first leg of a good rally is triggered by massive short-covering. This is followed by a re-test of the main bottom and then a drive higher. If traders don’t buy the retest, then the pattern will fail. Remember that big money does not pick bottoms but usually help form the secondary-higher bottom. Until a secondary higher-bottom is formed, consider any rally short-covering or profit-taking.

The March Australian Dollar reversed course overnight and is now in a position to test Thursday’s high at 1.0628. Yesterday the market broke slightly after trading this level, but this was most likely profit-taking rather than fresh shorting.

Technically the market is overbought by some oscillators which is giving a few traders an excuse to pare their existing open long positions. Furthermore, the market is testing the October 27 top at 1.0584. Since this top was made during a tumultuous time period, long traders are respecting the strength of this price level. In addition, big money may be defending this level so it may take a few attempts to finally pierce it.

The current up leg from the October 9 bottom at 1.0065 has been moving up an impressive .004 per day since it was formed. This places the uptrending Gann angle guiding the market at 1.0585 today which squares almost precisely with the old top at 1.0584. You can call it a pivot zone or a resistance cluster depending on which side of the market you are favoring at this time.

If you are a trend trader then you would like to see the market trade on the bullish side of this angle. This would make 1.0585 a key support level. If you have a counter-trend opinion or are looking for a reason to exit some profitable long positions then this is a logical price zone.

One caution that traders should be aware of is the possibility of a correction into the next uptrending Gann angle at 1.0325. You can see from the current chart set up that a failure to regain 1.0585 will make the market vulnerable to a near-term correction. Besides the Gann angle, traders have to be aware of a possible retracement of the current rally from 1.0065 to 1.0628. This zone has been identified as 1.0347 to 1.0280.

On the upside, if the market can breakout above the old top at 1.0584 with conviction then the July 24, 2011 top at 1.0789 will be deemed the next potential upside target. As long as the interest rate differential continues to favor the higher yielding assets, there is no strong reason why the Australian Dollar should lose ground to the U.S. Dollar over the near-term.

For more information, please visit http://PatternPriceTime.com.

The March Euro futures contract changed its trend to up on the daily chart on Wednesday after it broke through the January 3 swing top at 1.3085. The subsequent follow-through rally has put the market in a position to test a downtrending Gann angle at 1.3191 and a Fibonacci retracement level at 1.3204. This creates a potential resistance cluster.

Now that the Euro is trading on the bullish side of a 50 percent price at 1.3094, this level is new support. This is followed by an uptrending Gann angle at 1.2987. Slow and steady can best describe this nine day rally so any volatile or spiky action is likely to indicate a developing short-term shift in sentiment. Since this can be described as a prolonged move in terms of price and time, traders should also watch for a closing price reversal top to signal the end of the move and perhaps the start of a short-term correction.

Fundamentally, the rally started when financial peace broke out in Europe in the form of serious talks with Greece regarding its refinancing. The fact that Germany’s economy is not falling apart contributed to the rally.

While the calm in Europe may have helped halt the decline and trigger the short-covering rally, yesterday’s news that the U.S. Federal Reserve may keep interest rates at extremely low-levels into late 2014 is fueling today’s rally. Apparently the Asian traders liked it based on their overnight support. Who’s to blame them, it is basically an announcement of free money and this is the fuel that drives up demand for risky assets.

With U.S. rates at near zero and likely to stay their for another two years, money is once again seeking its highest level and that is in the higher yielding currencies such as the Euro, Canadian Dollar and Australian Dollar. Interest rate deferential trading is back in vogue today, forcing the situation in Europe to take a back seat. How long this will last is the question, but today it is the catalyst behind the move.

This doesn’t mean you can take your eye off of the debt situation in Europe, but what it does say is that there is a relative calmness in the markets right now and institutions and banks are being allowed to do what they do best and that is move money around, even if it means chasing an ultra-low yield. Just keep in mind that they are making plenty off of the lending spread so don’t feel sorry for them. It’s not like they are getting paid the same yields to lend money as the middle-class investor in the U.S.

For more information, please visit http://patternpricetime.com/.

The March Canadian Dollar is showing signs of life this morning after Thursday’s and Friday’s dismal closes. Although a daily closing price reversal top was formed on January 19, the pattern didn’t look like the typical reversal top in that it was not formed following a prolonged move in terms of price and time. In hindsight, it looks as if it was formed simply as a reaction to the .9923 main top from December 8.

Monday’s early upside action suggests that bullish traders are ready to give it another go at an upside breakout since there appears to be overnight demand for risky assets such as commodities and stocks. Bullish traders may be licking their chops at the current formation because of the huge amount of room to the upside over .9923. If there is upside momentum on the breakout with above average volume, we could be looking at the possibility of an acceleration to the upside once the resistance is cleared.

If the market breakouts, but there is a pull-back then traders should watch for the old top to become a new bottom. If it fails to provide support then we can conclude the breakout was triggered by buy stops rather than fresh buyers. There is a strong possibility of this occurring since volatility has been dropping and volume has been relatively light.

Besides the resistance levels, traders should also be watching the support levels. After zigzagging several times over the uptrending Gann angle, it looks as if traders may be establishing support at .9875. The first sign of weakness will be a break under .9827; however the main trend will not turn down until the main bottom at .9711 is violated.

For more information, please visit http://PatternPriceTime.com. 

The March Swiss Franc is trading lower overnight. Last night’s rally to 1.0755 fell short of breaking out over the last swing top at 1.0768. A trade though this level would have turned the main trend up on the daily chart and probably would have launched the start of a strong rally. With sell stops likely hidden over this level, traders should be prepared for a breakout at some point in the near future that could trigger an acceleration to the upside.

In the meantime, traders should be focusing on today’s developing closing price reversal top. Typically when a market forms a higher-top, lower-close, there is a 2 to 3 day correction back to 50 to 61.8 percent of the last rally. In this case, the rally from 1.0431 to 1.0755 should trigger a near-term correction back to 1.0593 to 1.0555.

Trend traders may want to press the short side today since the daily chart appears to have a downside bias. Aggressive counter-trend traders are likely to wait for the pull-back into the retracement zone before even considering the long side. Of course, a decision will have to be made whether to chase the market if it breaks out over 1.0568. Longer-term traders would like to see a secondary higher bottom formed between 1.0593 to 1.0555 to give them the confidence to trade the long side for a prolonged move.

The main trend turned up in March Sugar when it crossed the swing top at 24.25 on January 3. The lack of follow-through to the upside triggered a near-term correction, but the market was able to attract new buyers slightly above a key main bottom at 22.62.

With the market showing a higher-top and higher-bottom, there is a slight bias to the upside. The fact that the market has been trading in a compressed range is a strong indication of impending volatility. Upside momentum is needed to drive this market higher. If this occurs then the first objective is 50 percent of the 28.25 to 22.62 range at 25.49.

Traders should watch for a technical bounce at this level, but not necessarily the start of a change in trend. It is a natural selling point or profit target for short-term bulls, but a test of this level may not attract fresh shorting pressure which is necessary to turn the main trend back down.

Technically, this week’s rally in the March Euro is impressive, but it hasn’t changed the trend on the daily chart. This will only occur when the January 3 top at 1.3085 is violated. In fact, without a potentially bullish closing price reversal bottom to work with, all this currency has done up to this point is retrace slightly more than 50 percent of the break from 1.3085 to 1.2627.

With the main trend down on the daily chart and as the single currency enters a key retracement zone, traders should be looking for opportunities to re-enter on the short side. Besides the 50 percent retracement level, traders should pay particular attention to the 61.8% retracement level at 1.2911.

In addition, traders should also be watching for a reaction if the downtrending Gann angle at 1.2921 is tested. This price combined with the Fibonacci retracement level at 1.2911 could form a tight resistance cluster today.

Traders often ask me, “What is the daily trend in the March Australian Dollar?” Using my swing chart or main trend indicator I have to conclude that the main trend is up. My analysis suggests that the main trend turned up when the currency crossed 1.0193 on November 30 on its way to the last swing top at 1.0268 on December 8. The subsequent break to and the formation of a new higher bottom at .9761 is further confirmation that the main trend is up and likely to move higher once the last swing top is taken out.

Gann angle analysis suggests the market is trading inside of a triangle chart pattern with support being provided by an uptrending Gann angle from the main bottom at .9233 at .9803. Resistance is the downtrending Gann angle from the 1.0569 top at 1.0169. Following these angles into the future, one can see that an apex has been formed where the angles cross at .9986 on or about January 18 or 19. It is possible the market will ping-pong inside of this triangular formation until then. However, during the time until then volatility will be building inside of the triangle to produce a tremendous breakout.

Finally, horizontal support and resistance suggest the single currency is trading in between a pair of retracement zones. Based on the main range of .9233 to 1.0569, the first retracement zone is .9901 to .9744. Although this zone was penetrated in late November on the move to .9548, the lower boundary was quickly regained and the market was able to hold a retest at .9761 on December 15. Another resistance zone has been formed inside of the 1.0569 to .9548 range. This 50 to 61.8 percent retracement zone is bounded by 1.0059 and 1.0179. The upper end of this zone was broken when the market rallied to 1.0268 on December 8, but the market fell quickly back below it. Currently, it is straddling the 50 percent price at 1.0059.

In summary, the March Australian Dollar is in an uptrend. The Gann angles are indicating the market is trading inside of a triangle chart pattern which is a non-trending pattern. This, however, suggests impending volatility. Finally, the single currency is trading on the bullish side of a major retracement zone which is giving it an upward bias. If trader demand for higher risk assets, the Australian Dollar may receive the boost it needs to continue its rally.

Since reaching a top at $31.14 on its first day of trading, Groupon (GRPN) has traded lower. Currently the stock is in a position to post a secondary lower top at $25.15.

When GRPN turned its main trend turned down in late November after it crossed the swing bottom at $22.76, the market accelerated to the downside. When it reached the all-time low at $14.95, it was also oversold on the short-term charts. In addition, it bottomed almost simultaneously with the S&P 500 Index.

The subsequent rally was impressive, but it was basically just a greater than normal retracement of the sell-off from $26.90 to $14.85. From the top at $31.14 to the bottom at $14.85, GRPN formed a retracement zone at $22.99 to $24.92. The recent surge to $25.15 took the market slightly beyond the Fibonacci retracement, but the stock has subsequently broken back below this level as well as the 50 percent level at $24.92. This is the first sign of impending weakness.

In addition to the decline below the retracement zone, GRPN also formed a closing price reversal top at $25.15. This pattern typically indicates a 2 to 3 day break of equal to at least 50 percent of the last rally. The key is the confirmation and this will occur when $21.50 is penetrated. If this takes place then look for a possible break to 50 percent to 61.8 percent of the rally from $14.85 to $25.15 or $20.00 to $18.98 respectively.

Another sign of weakness is the breaking of the uptrending Gann angle at $22.85 today. As long as GRPN remains on the bearish side of this angle, the market is likely to feel downside pressure. The Rule of All Angles suggests that when one angle is broken, the market moves to the next angle. In this case, the market may break to the next uptrending Gann angle at $18.85 on Tuesday.

The combination of the retracement level and the uptrending Gann angle creates a potential support cluster over the next 1 to 2 days at $18.98 to $18.85. There may be a technical bounce in this cluster because short-traders may decide to take profits or bottom-pickers may choose to trade counter-trend. Remember that this scenario is not likely to take place until the closing price reversal top is confirmed.

Contact Market Analyst James A. Hyerczyk at patternpricetime.com.

The three day sell-off in March Cocoa has created a new main top at 2274. A trade through this price level will turn the main trend up on the daily chart. A trade through the last swing bottom at 1983 will reaffirm the down trend.

The short-term range of 1983 to 2274 suggests the market may be forming a bottom. The market made a daily closing price reversal when it created the potential final bottom. This reversal bottom was confirmed, but the market failed to follow-through to the upside. The range created a minor retracement zone at 2129 to 2094. This zone along with the uptrending Gann angle at 2103 may provide some “cluster” support.

The formation of a secondary higher bottom will be a strong sign that the market is getting ready to turn higher. Although 1983 was a better price to buy in hindsight, the odds are that it was produced by short-covering rather than new buying. Now that traders have a price to “lean” on in the form of the low at 1983, buyers may begin to step up to drive this market higher.

Another sign that a bottom may be in place will be crossing to the bullish side of the retracement zone at 2129 to 2094. This will be followed by a penetration of the downtrending Gann angle at 2164. Finally a breakout over the last swing top at 2764 will turn the main trend up on the daily chart and could trigger an acceleration to the upside into the major retracement zone at 2373 to 2466.

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