Technical Case for Weak EUR/USD Persists - Will Fundamentals Match?
- EURUSD continues to be guided by 13-EMA.
- Watch flag develop in USDJPY - failed breakout worth watching for.
- EURUSD has been on a major losing streak since mid-August.
EURUSD faces two important tests this week: the European Central Bank on Thursday; and whether or not it will maintain its downtrend at the daily 13-EMA. These fates are likely interconnected as a 'disappointing' ECB meeting on Thursday could ultimately reduce EURUSD price action to a simple short squeeze, prompting a test of the key daily 13-EMA.
For now EURUSD price settles around its lowest levels since November 2012 - a pivot point away from the critical July 2012 "whatever it takes" low - as the US Dollar looks well-bid still elsewhere. USDJPY has been quite prevalent in recent weeks, and the multi-day consolidation that appeared to give way to a bull flag may be starting again.
This particular USDJPY pattern at its current juncture is a good health check on the strength of the rally. Failure here, a false breakout through flag resistance ¥109.45 and close below ¥108.25/30, flag support and the daily 13-EMA, would be a significant bearish development, perhaps a top at the yearly highs.
--- Written by Christopher Vecchio, Currency Strategist
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