Euro Talking Points:
- Euro strength came back into play this week against both the US Dollar and the Japanese Yen.
- Can the single currency continue its Q4 streak of strength? Or will sellers soon come back into the equation? EUR/USD remains very close to a big area of potential resistance. For Euro bulls, EUR/JPY may offer a more attractive current backdrop.
- DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and 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.
Euro Strength Returns
Euro strength was back on the cards for this week as the single currency gained against both the US Dollar and the Japanese Yen. A bit of softening was seen in EUR/CHF as the pair pushed back down to the 1.1000 level but, all in all, the Euro has remained rather resilient so far through the first month of Q4 even as the fundamental backdrop remains not-so-bright. A number of technical items remain of interest across Euro-pairs and in the major of EUR/USD, the backdrop remains murky as the current bullish theme is fast-approaching a big area of resistance.
The price zone in EUR/USD that runs from 1.1187-1.1212 has now been in consideration for almost a full year. The 2018 sell-off in the pair, driven by fears around Italian politics, sent the Euro reeling-lower. After finding resistance around 1.2500 in February and then 1.2400 in April, the bottom fell out of EUR/USD as prices dropped all the way down to sub-1.1300 into November 2018. But, as the 1.1212 level was coming back into play for the first time in a year-and-a-half, sellers slowed the approach; support developed and prices began to bounce. That held all the way into March of this year, at which point sellers took another swing but, again, were re-buffed when prices found support around the 1.1187 level. This continued through early April and sellers’ persistence eventually took the lead, with this zone becoming resistance in May before showing support again in June. More recently, this is the area of prices that helped to carve-out the highs in early-August, just before EUR/USD started to fall down to fresh two-year-lows.
EUR/USD Daily Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
The Q4 move of strength in EUR/USD has thus far been consistent and clearly bullish; but the zone of resistance lurking just ahead caps top-end profit-target potential on EUR/USD. As such, the forecast for EUR/USD will be set to neutral for next week, although Euro buyers may look towards EUR/JPY for similar such plays with a potentially more attractive backdrop. That setup is investigated below.
EUR/USD Technical Forecast: Neutral
EUR/USD Four-Hour Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
EUR/JPY Holds Support Above 120.00 Big Fig
Drivers around US-China trade talks have been rather difficult to work with of late, perhaps more so than usual. The latter-portion of this week saw some hope develop on that front and in-turn the Japanese Yen is selling-off on the back of diminishing risk aversion. This can keep the topside of EUR/JPY as an attractive venue for long-Euro and/or risk-on plays, following the progression of higher-highs and higher-lows through early-October trade until the build of the current short-term range.
That range offers support just above the 120.00 psychological level with range resistance around 121.50, thereby allowing for both trend strategies and range strategies with a prior trend-side bias.
EUR/JPY Technical Forecast: Bullish
EUR/JPY Four-Hour Price Chart
Chart prepared by James Stanley; EURJPY on Tradingview
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
