The Australian Dollar is under pressure overnight. A new main top has been formed at 1.0200, setting up a possible retracement to 1.0033 to .9993. Yesterday’s interest rate hike by China’s central bank is expected to slow down a heated up economy. This may lead to a slowdown in demand for Australian goods and services.

The Euro’s closing price reversal top on Wednesday was confirmed overnight, indicating that the market may retrace back to 1.3716 to 1.3681 over the near-term. Technically the main trend remains up unless 1.3570 is taken out; however, a closing price reversal top is often the trigger that begins a change in trend.

The Euro continues to climb higher this morning, challenging the .618 retracement level of the 1.4282 to 1.2873 at 1.3744. There may be a technical bounce off this level, but this action will most likely represent profit-taking rather than a change in trend. Both technical and fundamental factors are supporting the rally at this time, so if a top is formed it will come as a surprise.

With the Euro rapidly approaching the major retracement zone at 1.3577 to 1.3744, traders have to be asking themselves if overcoming this area means investors are betting on a rate hike by the European Central Bank or do they believe that Europe is overcoming its fiscal problems.