Euro Talking Points:
- The Euro is heading lower against the Japanese Yen, extending a bearish move that showed up on this week’s open. Prices in EUR/JPY gapped-down and then ran to monthly lows to start this week, and sellers haven’t yet let up as prices are holding near three-month-lows.
- EUR/USD remains in a key zone of resistance taken from prior range support. Prices in the pair remain in digestion, with price action building into a symmetrical wedge over the past week.
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Euro Sellers Make a Push
Euro Sellers are making a push this morning, with both EUR/USD and EUR/JPY down on the day. The theme in EUR/USD is perhaps a bit less exciting, given that prices have been digesting over the past week. But, the anti-risk Yen remains relatively strong, and this has allowed EUR/JPY to hold below a weekend gap that hasn’t yet filled. With global stocks continuing to display brisk volatility, this keeps the door open for breakout potential in the Euro as we move deeper into the week.
In EUR/USD, prices have been testing below a long-term zone of support as taken from the range that ran from November of last year into April of this year. Two weeks ago brought a breakdown below support, but sellers were met with support at the 1.1120 level, and prices retraced up the 1.1250 area of prior resistance. Last week brought another test below prior support after the FOMC rate decision but, again, sellers were soon quelled; but this time at 1.1135, allowing for a higher-low to build. The net of this produces a short-term symmetrical wedge formation that’s built around the prior support zone that runs from 1.1187-1.1212.
EUR/USD Four-Hour Price Chart
Chart prepared by James Stanley
Taking a step back, and it becomes a bit clearer as to why downside here can be attractive attractive. EUR/USD began it’s turn in Q2 of 2018; and by November of last year the pair had dropped by more than 1200 pips. But that’s when the key support zone came into play, and this is the same zone that’s at work with this morning’s price action. If prices can break down, there’s a lot of room underneath support for prices to run, with follow-thru support potential at 1.1075, 1.1000 and, longer-term, the zone from 1.0814-1.0863.
EUR/USD Daily Price Chart
Chart prepared by James Stanley
EUR/JPY Bounce from Three Month Lows Under Attack
In EUR/JPY, matters aren’t as congested; but there may be a setting up of a bear trap given the current context. Prices in the pair gapped-down to start the week, and sellers pushed down to fresh three-month-lows during yesterday’s trade. That support test was followed by a bounce; but sellers didn’t allow for this week’s gap to be filled before jumping back on the offer, with follow-thru support showing at those prior three-month-lows.
EUR/JPY Daily Price Chart
Chart prepared by James Stanley
The big question at this point is whether Euro sellers will be able to continue pushing? Given the recent themes of risk aversion, with global equities hitting a rough patch after last week’s FOMC rate decision, and there could be motive for continued movement-lower.
On the other side of the argument, however, a short-term bullish theme might be of attraction for those that aren’t yet looking for bearish breaks in the Euro. A hold of support around 123.65-123.81 leaves the door open for a test up to the 124.56 area, looking for this week’s gap to be filled before a bigger-picture bearish response might be possible.
EUR/JPY Four-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 have a section for each major currency, and we also offer a plethora of resources on Gold or 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
