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Euro Crosses Technical Analysis: EUR/JPY, EUR/CHF to Extend Gains?

Euro Crosses Technical Analysis: EUR/JPY, EUR/CHF to Extend Gains?

Daniel McCarthy, Strategist

Euro Cross Rates, EUR/JPY, EUR/CHF - Talking points

  • The Euro has rallied hard off August lows against the defensive JPY and CHF
  • Current setups have strong momentum but both crosses have resistance ahead
  • A number of technical levels have been broken but can the run continue?

EUR/JPY TECHNICAL OUTLOOK

The Euro made a new 2021 low against the Japanese Yen in August at 127.93. That was below the stretch of the Bollinger Band at the time. Moving 22 standard deviations from the 21-day simple moving average (SMA) is often seen as a technical stretch for markets. This is represented by the Bollinger Band. Assuming a normal distribution, or ‘bell curve’, of data, this means that the market may trade within the Bollinger Bands 95% of the time.

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Many technicians look for a market to move back inside a Bollinger Band for a momentum signal. After the August low was put in place and EUR/JPY moved back inside the lower bound of the Bollinger Band at 128.15, the cross experienced a fast-moving rally to the recent high at 130.74.

This point eclipsed a the late-July high of 130.56 and ran through the Bolling Band upper bound of 130.61 at the time. It has since faded back inside the Bollinger Band and probability suggests that EUR/JPY may consolidate back within a range.

Another push higher would likely see a test of resistance levels at the falling trendline around 131.00 and at the 100-day SMA at 131.11.

Looking at the downside, support may come in at the break-up pivot point of 129.77, the 21-day SMA at 129.40 and then the previous low of 127.93.

EUR/JPY CHART

EUR/JPY CHART

Chart Created in TradingView

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EUR/CHF TECHNICAL ANALYSIS

EUR/CHF has had a strong rally since the mid-August low of 1.0696, moving up to the recent high of 1.0880. This took out the most recent previous high of 1.0865.

There are significant resistance levels ahead and a further rally to break through the 100-day SMA of 1.0884 and the trendline resistance of 1.0885 may see the cross open a new range trading window. Above that, 1.0987 may be a key top-side resistance level.

The 21-day SMA has an upward sloping gradient courtesy of the speed of the move higher and may provide support, currently at 1.0785. Further support seems to be at the previous low of 1.0696.

EUR/CHF CHART

EUR/CHF CHART

Chart Created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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

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