EUR/USD, EUR/GBP, EUR/JPY – EURO FORECAST & PRICE ACTION SETUPS
- EUR/USD exploded above the 1.1100 price level and its 200-DMA on the back of widespread Euro strength and US Dollar weakness over recent trading sessions
- EUR/GBP price action gained a mere 32-pips last week as Euro-Pound bulls grew exhausted and failed to surmount the 38.2% Fibonacci retracement of its year-to-date range
- EUR/JPY prices just spiked to a 9-week high after the Euro-Yen surged past bearish trend resistance in an apparent topside breakout attempt
The Euro was one of the top performing major currencies last month alongside its pro-risk AUD peer. Euro price action climbed largely in response to an influx of demand that followed news of a proposed EU recovery fund.
EURO CURRENCY INDEX PRICE CHART: 2-HOUR TIME FRAME (30 APRIL TO 29 MAY 2020)
Chart created by @RichDvorakFX with TradingView
On balance, the Euro Index (EXY) gained 1.5% from April 30 to its 29 May close, which compares to the -0.65% monthly decline recorded by the US Dollar Index (DXY). Notable strength in the Euro, exacerbated by broad US Dollar weakness, propelled EUR/USD prices 160-pips higher last month and past a key barrier of technical resistance.
EUR/USD PRICE CHART: DAILY TIME FRAME (DEC 2019-MAY 2020)
The impressive advance notched by Euro price action over recent trading sessions helped spot EUR/USD explode above the 1.1000 handle as the most liquid FX pair soars past its 200-DMA. Though Euro bulls have strong-armed the bloc currency considerably higher against its safe-haven US Dollar peer, the late-March swing high remains a prominent obstacle.
| Change in | Longs | Shorts | OI |
| Daily | 9% | 6% | 8% |
| Weekly | 14% | -19% | -1% |
This area might prove difficult to overcome seeing that EUR/USD price action currently rides along the upper channel of its 2-standard deviation Bollinger Band, which, statistically speaking, could facilitate a mean-reversion back lower. Barring a fundamental catalyst with potential of sparking a bearish reversal, however, EUR/USD has potential to extend its climb, perhaps toward its 2020 opening range near the 1.1200 price, if the Euro can surmount its 27 March intraday high.
EUR/GBP PRICE CHART: DAILY TIME FRAME (DEC 2019-MAY 2020)
Euro strength this past month was most notable against the Pound Sterling. EUR/GBP price action surged about 280-pips, or roughly 3%, from its 30 April to 29 May close as the Euro rallied after holding support underpinned by the 0.8700 level. The 61.8% Fibonacci retracement of its year-to-date range approximately highlights this area of technical confluence. That said, corresponding with a rejection of the 38.2% Fibonacci retracement, spot EUR/GBP looks like it just formed a shooting star candlestick, which typically signal the possibility for a bearish reversal.
| Change in | Longs | Shorts | OI |
| Daily | 5% | 9% | 6% |
| Weekly | -6% | -7% | -6% |
A breakdown of the relative strength index could accompany an acceleration in Euro-Pound selling pressure. In turn, this might steer spot prices lower toward trendline support extended through the 18 February and 06 May swing lows. Conversely, if spot EUR/GBP prices can top the March 27 intraday high, Euro bulls might attempt to make another push higher and potentially target the 23.6% Fib level.
EUR/JPY PRICE CHART: WEEKLY TIME FRAME (AUG 2016-MAY 2020)
EUR/JPY price action has been on an absolute tear higher since printing an apparent double-bottom pattern near the 115.00 mark. After the Euro spiked a whopping 500-pips against the Yen over the last three weeks, however, EUR/JPY now trades a touch below the 120.00 handle and faces noteworthy opposition going forward.
EUR/JPY bears might reiterate the overarching bearish trend developed by the major cross currency pair since 2018 as spot prices flirt with the 50-week exponential moving average. Nevertheless, spot EUR/JPY could keep climbing if trader sentiment remains unfazed and continues to weigh negatively on Japanese Yen outlook. On that note, eclipsing the 120.00 area might open up the door for Euro-Yen bulls to target year-to-date highs near the 112.50 price level.
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-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
