EUR Technical Analysis

The EUR/JPY pair fell significantly during the course of the session on Thursday, breaking through the 135 handle. With that being the case, the market has broken through significant support and should now be looked at as very soft. The European Central Bank suggested that perhaps more quantitative easing could be coming and as a result the Euro fell rather drastically around the world.

The Euro corrected modestly higher after swiftly sinking to the lowest level in over two months against the British Pound. Prices reversed downward as expected after putting in a bearish Dark Cloud Cover candlestick pattern at resistance below the 0.75 figure.

Near-term support is now at 0.7145, the 61.8% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 76.4% level at 0.7063. Alternatively, a move back above support-turned-resistance at 0.7211, the 50% Fib, sees the next upside barrier at 0.7278 marked by the 38.2% retracement.
We sold EUR/GBP at 0.7325 and have since taken profit on half of the trade. The rest of the position continues to be in play to take advantage of further weakness ahead. The stop-loss has been adjusted downward to the breakeven level.

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Talking Points:

• EUR/GBP Technical Strategy: Short at 0.7325
• Euro Declines for Third Consecutive Day After Failing to Break Trend Line Resistance
• Short Trade Still Active with Stop at Breakeven, Looking for Down Trend Continuation

The Euro finds itself under pressure once again after a surge against the British Pound following the BOE policy announcement failed to break trend line resistance. Prices have now declined for three consecutive days, making for the longest losing streak in a month, though momentum is far from convincing as ATR-based volatility drops to the lowest since April.

Near-term support is at 0.70941, the 23.6% Fibonacci expansion, with a break below that opening the door for a test of the 0.7025-42 area marked by the November 5 low and the 38.2% level. Alternatively, breaking above the 14.6% level at 0.7131 – a move that would likewise clear trend line resistance set from mid-October highs – clears the way for a challenge of the 38.2% Fib retracement at 0.7214.
We sold EUR/GBP at 0.7325 and then booked profit on half of the trade. The remainder of the position remains in play to capture continued downside momentum. The stop-loss has been revised to the breakeven level.



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Talking Points

• EUR/JPY meandering around key Fibo
• Last week’s low in the cross a key pivot

EUR/JPY: Flirting With Cyclical Breakdown

Last week’s 131.47 low is critical. If that was some sort of important medium-term cyclical low then it needs to hold and in fact it has. Yesterday there was a downside retest in EUR/JPY, but it couldn’t break under 131.47. This is clearly a positive. What I don’t like about the price action is the tepid nature of advance attempts this week. If the cross is indeed recovering from some sort of price/time square out then I would expect advances to be a little more dynamic than they have been. A move through this week’s high is desperately needed to instill some sort of upside momentum into the rate as it would it would also trigger a minor double bottom. The flipside is we get a break of 131.47. This would invalidate the positive timing aspect from last week and signal a likely resumption of the downtrend in place since June.

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Talking Points:

• EUR/GBP Technical Strategy: Flat
• Bearish Evening Star Candlestick Pattern Hints at Euro Losses vs. British Pound
• Firming Inverse EUR/GBP vs. S&P 500 Correlation Warns Against Short Trade

The Euro put in a bearish Evening Star candlestick pattern, hinting that a turn lower against the British Pound may be looming ahead. Prices recovered as expected having found interim support below the 0.70last month but the dominant down trend set from August 2013 remains intact, painting the move as corrective.

Near-term support is at 0.7158, the 23.6% Fibonacci expansion, with a break below that on a daily closing basis paving the way for a test of the 38.2% level at 0.7084. Alternatively, a push above the December 9 high at 0.7278 opens the door for a challenge of falling trend line resistance at 0.7403.

Establishing a short position is a tempting proposition from a purely technical perspective. A firming inverse correlation between EUR/GBP and the S&P 500 sets off alarm bells however. Indeed, the trade may turn out to be disastrous in the plausible event of risk aversion following next week’s FOMC policy announcement. With that in mind, we will tactically opt to stand aside.

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EUR/CAD: bullish breakout. The pair is on bullish market condition since the beginning of Dec this year: price broke Ichimoku cloud from below to above together with Senkou Span line which is the virtual border between the primary bearish and the primary bullish trend on the chart. The price was stopped by 1.5125 resistance and 1.5200 resistance levels together with ascending triangle pattern to be formed for the price to be started with the ranging market condition near and below those resistance levels. The price is ranging within the following key reversal support/resistance levels:

• 1.5200 resistance level located above Ichimoku cloud in the primary bullish area of the chart, and
• 1.4618 support level located on the border between the bearish and bullish trend on the daily chart.

There are 3 simple scenarios for the price movement for the next week:

• bullish trend will be contining in case the price breaks 1.5200 resistance from below to above.
• bearish reversal to be started in case the price breaks 1.4618 support level,
• or the ranging within the levels.

Chinkou Span line is located above the price indicating the bullish breakout to be continuing by direction.

Resistance	Support
1.5125	1.4618
1.5200	1.4023

Daily price is located between 100 day SMA (100-SMA) and 200 day SMA (200-SMA) with the ranging market condition waiting for the direction for the possible breakout or breakdown. The key reversal support/resistance levels for this pair are the following:

• 1.5574 resistance level located above 100-SMA/200-SMA in the beginning of the bullish area of the chart, and
• 1.4952 support level located below 200-SMA in the beginning of the bearish area of the chart.

RSI indicator is estimating the ranging condition to be continuing.

• If the price will break 1.5574 resistance level so we may see the bullish trend to be started on this timeframe.
• If price will break 1.4952 support so the bearish trend will be continuing.
• If not so the price will be ranging within the levels.

Resistance	Support
1.5574	1.4952
1.6590	1.4345

• Recommendation to go short: watch the price to break 1.4952 support level for possible sell trade
• Recommendation to go long: watch the price to break 1.5574 resistance level for possible buy trade
• Trading Summary: ranging

SUMMARY : ranging

TREND : waiting for direction

• "The Euro resumed the push higher against the British Pound after two weeks of range-bound consolidation, with prices now aiming to challenge the monthly high. The dominant multi-year trend continues to favor the downside however, painting the upswing from mid-November 2015 lows as corrective."
• "A daily close above the 23.6% Fibonacci expansion at 0.7912 opens the door for a challenge of the 38.2% level at 0.8046. Alternatively, a turn below resistance-turned-support at 0.7830, the 14.6% Fib, paves the way for a test of the 0.7703-35 area (horizontal pivot, rising trend line)."

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W1 price is on primary bearish market condition to be located below yearly Central Pivot at 133.61: the price was bounced from S1 Pivot at 123.07 to above for the ranging within Yearly PP and S1 Pivot. Descending triangle pattern with 123.07 support level was formed by the price to be crossed for the bearish trend to be continuing.

Instrument	S1 Pivot	Yearly PP	R1 Pivot
EUR/JPY	123.07	133.61	141.13

Trend:

• W1 - ranging bearish

Weekly price is on primary bullish trend located above 100-period SMA and 200-period SMA for the secondary correction: the price was bounced from 1.4386 support level for the ranging within key bullish s/r levels.

If the price breaks 1.4386 support level so the bearish reversal will be started with the secondary ranging.
If the price breaks 1.6103 resistance level so the bullish trend will be continuing.
If not so the price will be ranging within the levels.