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Four-Week Trend Structure Persists in EUR/USD, EUR/GBP

Four-Week Trend Structure Persists in EUR/USD, EUR/GBP

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD, EURGBP remain pressured by four-week downtrends.

- EURUSD has finished year in direction of first week 13 of 16 times.

- See the DailyFX Economic Calendar for Monday, January 12, 2015.

What are some of the merits of the recent Euro decline? A long-term quantitative inquiry is revealing. Since the Euro’s inception in 1999, the Euro has closed each year in the direction of the first week’s close 13 of the 16 occurrences.

Euro bears may be encouraged by this outcome, as the prevailing backdrop of monetary policy divergence between the ECB and the Fed should be enough of a fundamental constraint to keep EURUSD pressured throughout 2015 – even if a brief short covering rally makes an appearance over the next few weeks.

For now, the key trend to watch in EURUSD is what's taken place since December 17. At that time, the daily 5-EMA started to push below the daily 8-EMA, a sign that short-term momentum was shifting to the downside. Concurrently, when viewing EURUSD price on a H4 timeframe, neither Stochastics (50) nor MACD (zero) has traded through its respective median line over the past four-weeks.

Despite perceived shifting fundamentals vis-a-vis the ECB and the Fed, we must continue to respect the bearish technical structure of the market.

See the above video for technical considerations in EURUSD, EURGBP, GBPCHF, and USDJPY.

Read more: Euro’s Weak Start to 2015 May be a Sign of Things to Come

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.