The strong support base in the Euro is helping to support the current rally. It is often said that “the height of the market is determined the length of the base.” Taking this into mind then the base formed by the three bottoms at 1.2329, 1.2388 and 1.2549 starting on October 28 support the start of a powerful intermediate term rally.

 

Based on the current range of 1.4866 to 1.2329, the first objective of the rally is just about to be met at 1.3597. The first test of this price may bring in some profit-taking, but the charts indicate the entire rally may have enough power to continue to 1.3897. Since the trend is up and the upside momentum strong traders should wait for a topping pattern to form at 1.3597 to 1.3897 before considering the short-side. 

 

If 1.3597 to 1.3897 becomes a resistance zone then traders should look for a corrective break to 1.3113 to 1.2963 for the next buying opportunity.

 

Fundamentally, the U.S. Dollar is trading weaker overnight. The EUR USD is surging on expectations that the Fed will cut rates to zero this week on December 16 and the U.S. Senate will use TARP money to bailout the Big 3 automakers. Late last week the European Central Bank provided fuel for a rally when it announced that the Euro Zone would recover from the economic slowdown starting in the second half of 2009. ECB members also indicated in some of their statements that the days of aggressive interest rate cuts may be over. All of this news is supporting the bullish chart pattern.