A combination of optimism in the Euro Zone and dovish commentary from the Federal Reserve is helping to pressure the U.S. Dollar overnight.

The EUR USD is mounting a strong comeback as traders have become more optimistic that Greece and the European Union are close to agreeing upon a loan bailout package. Although investors continue to remain nervous about the dire economic conditions in the Euro Zone, they do feel that the worst may be over at least in the short run. This news is encouraging a few of the weaker traders to cover their short positions while at the same time attracting aggressive bottom-pickers. The main concern among investors is the lack of clarity and detail regarding the pending agreement. Now that optimism appears to be returning, the lack of fresh positive news could help to limit gains.

Technically the Euro posted a daily closing price reversal bottom on Wednesday. This type of formation usually leads to a 2 to 3 day retracement. Based on the current chart formation, watch for a short-term rally to 1.3402.