Euro, EUR/USD, EUR/GBP, EUR/JPY, IGCS – Talking Points:
- Ascending Channel break hints at further losses for EUR/USD.
- EUR/JPY breaching Bull Flag resistance may inspire a push to fresh yearly highs.
- EUR/GBP rates continue to consolidate within a Symmetrical Triangle pattern. Is a topside break in the offing?
The Euro could be at risk of further losses against the US Dollar in the near term, as price slices through key uptrend support. However, the trading bloc’s currency may continue to gain ground against the Japanese Yen and British Pound. Here are the key levels to watch for EUR/USD, EUR/JPY and EUR/GBP in the weeks ahead.
EUR/USD Daily Chart – Ascending Channel Break Hints at Further Losses
EUR/USD daily chart created using Tradingview
The EUR/USD exchange rate may extend its recent slide lower after climbing to fresh multi-year highs on January 6 (1.2349), as price collapses through Ascending Channel support and the psychologically pivotal 1.2200 mark.
With the RSI diving back towards its neutral midpoint, and a bearish crossover taking place on the MACD indicator, the path of least resistance appears lower in the near term.
A convincing break below the December 4 high (1.2178) would probably ignite a more extensive pullback towards the 34-day exponential moving average (1.2138). Clearing that likely carves a path for sellers to probe the December 9 low (1.2059).
Alternatively, clambering back above 1.2200 could open the door to a retest of the yearly high (1.2349), if buyers can overcome mobile resistance at the 8-EMA (1.2238).
The IG Client Sentiment Report shows 41.48% of traders are net-long with the ratio of traders short to long at 1.41 to 1. The number of traders net-long is 16.26% lower than yesterday and 17.39% higher from last week, while the number of traders net-short is 4.11% lower than yesterday and 1.03% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.
Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.
EUR/JPY Daily Chart – Tentative Break of Bull Flag Resistance Hints at Gains
EUR/JPY daily chart created using Tradingview
EUR/JPY rates, on the other hand, appear to be gearing up for an extended topside push after slicing through Bull Flag resistance and the April 2019 high (126.79).
However, a bearish Hanging Man candle just shy of the 2019 high (127.50) suggests that a reversal lower could be in the offing, if sellers can successfully force price back below the 8-day EMA (126.77).
A daily close back below 126.70 could trigger a pullback towards the monthly low (126.04), with a break probably bringing range support at 125.70 – 125.90 into the crosshairs.
Conversely, an impulsive move higher looks likely if support at the 8-EMA remains intact. The Bull Flag’s implied measure move suggesting EUR/JPY may climb an additional 2% from current levels to probe the psychologically imposing 129.00 mark.
The IG Client Sentiment Report shows 40.50% of traders are net-long with the ratio of traders short to long at 1.47 to 1. The number of traders net-long is 2.08% higher than yesterday and 24.05% higher from last week, while the number of traders net-short is 6.49% lower than yesterday and 20.67% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise.
Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/JPY price trend may soon reverse lower despite the fact traders remain net-short.
EUR/GBP Daily Chart – Coiling Up in Symmetrical Triangle
EUR/GBP daily chart created using Tradingview
EUR/GBP rates are continuing to gyrate within the confines of a Symmetrical Triangle, as prices begin to consolidate above psychological support at 0.9000.
With price continuing to track above the sentiment-defining 200-day moving average (0.8982), and the MACD indicator hovering above its neutral midpoint, the path of least resistance seems to favour the upside.
A daily close above the 100-MA (0.9034) probably generates a push to challenge range resistance at 0.9070 – 0.9085. Hurdling that likely carves a path to test triangle resistance, with a daily close above 0.9175 ultimately needed to validate the continuation pattern.
The Symmetrical Triangle’s implied measured move suggesting buyers could drive the exchange rate towards the March 2020 high (0.9499).
The IG Client Sentiment Report shows 40.02% of traders are net-long with the ratio of traders short to long at 1.50 to 1. The number of traders net-long is 1.13% lower than yesterday and 12.31% lower from last week, while the number of traders net-short is 5.77% lower than yesterday and 43.68% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/GBP prices may continue to rise.
Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.
-- Written by Daniel Moss, Analyst for DailyFX
Follow me on Twitter @DanielGMoss
