EUR Technical Analysis

Near-term term resistance is at 0.9150, the 38.2% Fibonacci expansion, a daily close above that opening the door for at challenge of the 50% level at 0.9231. Alternatively, a reversal below rising trend line support at 0.9090 exposes the 23.6% Fib at 0.9051, followed by the 14.6% expansion at 0.8990.

Negative RSI divergence is not sufficient by itself to justify taking a short position without further confirmation. It is enough of a warning not to try for the long side however, at least for now. With that in mind, opting for the sidelines seems most prudent until greater clarity emerges.

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s. After a topside breakout, EUR/JPY traded up to another new high at 134.41. This is a key Fibonacci level, as 134.41 is the 61.8% retracement of the 2014-2016 major move in the pair, and this is helping to set near-term resistance.

That resistance came into play on Friday morning, and after grinding around this level for a few hours, sellers took over and drove prices lower. And that retracement continued with aggression until another support zone came into play. At 132.05 we have the 50% retracement of the 2008-2012 major move, and at 131.70 we have the prior swing-high point of resistance. Prices found support here yesterday morning, and since then we’ve seen a bullish response as prices have trickled higher.

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The Euro is digesting losses having fallen to the lowest level in over two months against the British Pound, with positive RSI divergence hinting a rebound may be ahead. The near-term trend continues to be defined by a series of lower highs and lows however, meaning the path of least resistance favors the downside.

From here, a daily close below the September 27 low at 0.8746 opens the door for a test of 0.8696, the 38.2% Fibonacci expansion. Alternatively, a push above the 23.6% Fib retracement at 0.8879 sees the next upside barrier at 0.8960, marked by the 38.2% retracement line.

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The pair put in quite the performance in the middle two quarters of 2017, jumping from a mid-April low below 115.00 to set a fresh 2017 high just a few weeks ago at 134.41. This move, of course, has been driven by a host of fundamental factors revolving around both the Euro and the Japanese Yen, and as we near what’s expected to be a pivotal European Central Bank meeting later in the month, that previously bullish move has continued to digest around higher-low support.

At current, both near-term support and resistance are being defined at least in-part by retracement levels from longer-term Fibonacci studies. The price of 132.05 is the 50% retracement of the 2008-2012 major move and this, along with the prior swing-high at 131.70 is helping to set current support. And on the resistance side, 134.41 is the 61.8% retracement of the 2014-2016 major move; and after two days of testing in mid-September, bears took over and brought prices down to that higher-low.

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The Euro may be readying to resume the down trend started in late August against the British Pound after a corrective upswing stalled ahead of the 0.90 figure. A pair of bearish candlestick patterns has emerged and negative RSI divergence bolsters the case for a downside scenario.

Near-term support is at 0.8891 (14.6% Fibonacci expansion, former trend line resistance), with a daily close below that opening the door for a retest of the September 27 low at 0.8746. Alternatively, a sustained push above the 23.6% Fib at 0.8981 exposes the 38.2% expansion at 0.9126.

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The Euro broke support guiding it higher against the British Pound through November, hinting the dominant down trend may be resuming. Prices have been locked in a choppy range since late September but a break of rising trend support after a test of the post-Brexit vote high hints the overall bias favors the downside.

Near-term support is at 0.8796, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 0.8728-46 area (September 27 low, 50% level). Alternatively, a move back above the November 21 lowat 0.8842 exposes the 23.6% Fib at 0.8879 for a retest.

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EUR/JPY capped off what was an impressively strong 2017 by continuing to show strength in the first few trading days of the New Year. But, after an evening star formed around the close of the first week of the year, prices continued to drop as worries about a ‘stealth taper’ from the Bank of Japan created considerable Yen strength.

This amounted to a pull-back in the previously ebullient trend of EUR/JPY, and as we wrote last week, prices had pulled back to the first of two interesting areas of potential support. That support is derived from a trend-line projection that can be found by connecting the August and November lows from last year; the projection of which runs into December and now January, 2018 swing-lows.

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EUR/GBP Technical Strategy: Flat

The Euro has struggled to make lasting headway against the British Pound but overall technical positing continues to point in favor of the upside. A seemingly clear Falling Wedge chart formation carries bullish implications, hinting the uptrend dating back to April 2017 may soon resume.

Defining resistance comes in at 0.8924 (Wedge top, 23.6% Fibonacci retracement), with daily close above that paving the way for a test of the 50% level at 0.8997. Alternatively, a reversal back below the 0.8795-0.8806 area exposes the 0.8674-87 zone (January 25 low, 38.2% Fib expansion).

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EUR/JPY Takes Out Support Zone

Over the past couple of week’s we’ve been following a rather pensive test of a long-term support zone in EUR/JPY. Throughout most of last year, EUR/JPY remained in a bullish trend that kept some very clean characteristics; key of which was what happened around the October ECB rate decision. This is when the ECB extended their stimulus program, disappointing the hopes that had built for some type of announcement around taper or stimulus exit. This led to rather noticeable support breaks in pairs like EUR/USD; but in EUR/JPY, prices merely moved down to support, at which point buyers showed up, and the lows held until bullish price action was able to take over in December.

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EUR/USD is coming perilously close to carving out a bearish price sequence in the days ahead. We’ve been discussing quite a bit lately the impact of the 2008 trend-line, and as long as the euro stays below it will struggle. The struggle could turn into an outright sell-off if a bounce soon fails.

The double-top at the 2008 trend-line put into motion the notion we may be seeing a top form at an important line of resistance. And now with EUR/USD possibly putting in a lower-low from earlier last month, in the days ahead the euro may be ready to turn down from the long-term trend-line for an extended period of time.

The trend since last year is still pointed up, but a strong turn down will have important support by way of the 2017 high and trend-line from April come under fire. A solid close below 12100 is seen as a possible catalyst for a sizable unwind by large speculators in the futures market. Positioning has been hovering in record territory for a while and suggests on a turn of trend there will be plenty of fuel to drive the single-currency lower.

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