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Euro Outlook: EURUSD Bounce at Key Support, EURJPY Rally Above 125.00

Euro Outlook: EURUSD Bounce at Key Support, EURJPY Rally Above 125.00

2019-04-03 13:00:00
James Stanley, Currency Strategist
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Euro Price Talking Points:

- After starting Q2 with a dig into long-term support, EURUSD prices have been recovering and are now testing the 1.1250 psychological level. Can EURUSD buyers bring on a test of deeper resistance potential around the 1.1310-1.1322 area on the chart?

- For Euro bulls or for those looking to take on bullish exposure in the single currency, EURJPY may be a more attractive option. The pair has just re-claimed ground above a key area on the chart at 125.00; and Yen-strength or weakness appears to remain correlated with the risk trade, which can keep bullish EURJPY themes as a touch more attractive than similar motives in EURUSD.

- DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

EURUSD Bounces From Range Support

After starting Q2 with a dip-down to support, EURUSD has rallied from the 61.8% Fibonacci level of the 2017-2018 bullish move. That price comes in at 1.1187, and this is the same area of support that had helped to arrest the lows in the pair last month around the ECB rate decision.

EURUSD Four-Hour Price Chart

euro eurusd eur/usd four hour price chart

Last month’s ECB rate decision is when the bank announced a fresh round of TLTRO’s just a few months after announcing an exit from stimulus; and that helped to bring on a bearish move in the Euro. EURUSD fell briefly below range support in a formation that had held prices for the prior four-and-a-half months; but sellers were unable to continue the move as less than 24 hours another theme came front-and-center for the FX market, and that was the US Dollar’s failed breakout at yearly highs. An abysmal NFP report issued the morning after ECB helped US Dollar weakness to take-over, and that helped EURUSD continue within the range that had been in-play since November.

EURUSD Daily Price Chart

euro eurusd eur/usd daily price chart

Prices in EURUSD trickled all the way up to the very bottom-side of range resistance, at the Fibonacci level of 1.1448, at which point sellers came back with a vengeance and pushed EURUSD back down to the support side of that range. As a catalyst, the FOMC rate decision later in March helped with the development of both themes, as a quick run of USD-weakness around the FOMC statement saw DXY find support at a bullish trendline, keeping alive the ascending triangle formation. That support bounce in USD to go along with the bearish theme in EURUSD lasted into the end of Q1 and the first day of Q2.

EURUSD Bounce: Levels to Know

With EURUSD holding support in the now five-month-old range, focus moves to the 1.1250 level which is currently helping to hold this morning’s high. This level had provided price action support within the longer-term zone in mid-February, and a dose of resistance-turned-support in early-March after the NFP release triggered a bullish rally in the pair. Looking-higher on the chart, the 1.1310-1.1322 area remains with resistance potential, as this was a zone of lower-high resistance taken from last week. And if buyers can push through there, focus them moves towards the 1.1400 level and the 1.1448, which marks the beginning of longer-term range resistance.

EURUSD Two-Hour Price Chart

euro eur/usd eurusd two hour price chart

EURJPY Rallies Above 125.00 as Risk Aversion Takes a Back Seat

As risk aversion themes have quieted into Q2, so have themes of Yen-strength that began to show more prominently a couple of weeks ago. It was around the FOMC rate decision when USDJPY tipped-lower, breaking a streak of bullish trends that had lasted for most of the quarter. USDJPY found support at a key zone on the chart that runs from 109.67-110.00; and that marked a slowing of the theme of Yen-strength. In EURJPY, this coincides with the support area around 123.80, which was the late-January swing-low in the pair. Prices tested this area twice in late-March, each of which failed; and the second of which led into a bullish run that continues into this morning’s trade.

For traders looking at bullish stances on the single currency, this can be an attractive option, particularly if those traders are looking to avoid USD-risk. In EURJPY, prices are continuing a posture of higher-highs and higher-lows; and the 125.00 area had previously given some rigid resistance when prices were on their way up. This can be an area of interest for higher-low support in themes of bullish continuation.

EURJPY Two-Hour Price Chart

euro eurjpy eur/jpy two hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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