Crypto

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD


Euro Outlook:

  • Each major EUR crossing has its own story to tell; there is no consistent technical theme under EUR / GBP, EUR / JPY and EUR / USD rates.
  • Buying declines in EUR / JPY may be appropriate, as can selling rallies in EUR / USD. But the chart offers no observable direction for EUR / GBP.
  • Per the IG customer sentiment index, each of EUR / GBP, EUR / JPY and EUR / USD rates have a mixed bias.

No consistent narrative?

Commodity markets remain highly volatile, leading to significant outperformments by the Australian, Canadian and New Zealand dollars against European currencies. And although pairs like EUR / AUD, EUR / CAD and EUR / NZD have shown significant losses in recent weeks, the same cannot be said for the three major EUR crosses: EUR / GBP, EUR / JPY and EUR / USD.

However, the relative stance of monetary policy among the major central banks may be the underlying theme. EUR / USD weakness, for example, coincided with a surge in short-term Fed rate hikes. EUR / GBP’s stability has coincided with exchange rate markets reducing the chances of a BOE increase in the near term, while holding out hope that the ECB will take action later this year. And with the BOJ continuing its ultra-loose monetary policy in the face of rising energy costs, the EUR / JPY is simply acting like all other JPY crossings at the moment – a straight line.

EUR / USD TECHNICAL ANALYSIS RATE: DAILY MAP (March 2020 to March 2022) (GRAPH 1)

After the initial bearish outbreak of the sideways series that was cut in January and February, EUR / USD rates returned to their breakout level before turning lower again. Bearish momentum is beginning to reaffirm itself, with EUR / USD rates below their daily 5-, 8-, 13- and 21-EMA envelopes, which are in full bearish sequential order. Daily MACD’s climb while slowing below its signal line, and daily Slow Stochastics has just issued a sell signal. The double top is still in play, with the measured move pointing to losses continuing below 1.0800.

IG Client Sentiment Index: EUR / USD Rate Forecast (24 March 2022) (Chart 2)

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD

EUR / USD: Retailer data shows that 61.42% of traders are net long with the ratio of traders long to short at 1.59 to 1. The number of traders net long is 1.50% lower than yesterday and 10.76% higher from last week, while the number of traders net-short is 3.24% higher than yesterday and 0.99% lower from last week.

We usually have a conflicting view of crowd sentiment, and the fact that traders are only long indicates that EUR / USD prices may continue to fall.

Positioning is less net long than yesterday, but more net long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR / USD trading bias.

EUR / JPY RATE TECHNICAL ANALYSIS: DAILY MAP (March 2021 to March 2022) (GRAPH 3)

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD

EUR / JPY rates have begun to remove two major hurdles indicating a significant bullish rally in its early stages: the 2021 high at 134.12; and the 61.8% Fibonacci retracement of the 2014 high / 2016 low range at 134.29. The performance suggests that the multi-month bull flag that formed after breaking above the declining trend line from the July 2008 and December 2014 highs has finally yielded an upward movement indicating further strength in the weeks and months ahead. However, a return to the flag breakout level near 132.80 is not out of the question; buying the dips is henceforth the preferred strategy.

IG Client Sentiment Index: EUR / JPY Rate Forecast (24 March 2022) (Chart 4)

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD

EUR / JPY: Retailer data shows 26.96% of traders are net long with the ratio of traders short to long at 2.71 to 1. The number of traders net long is 21.13% higher than yesterday and 11.79% lower from last week, while the number of traders net -short is 2.31% lower than yesterday and 23.61% higher from last week.

We usually have a conflicting view of crowd sentiment, and the fact that traders are just short indicates that EUR / JPY prices may continue to rise.

Positioning is less just-short than yesterday, but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR / JPY trading bias.

EUR / GBP TECHNICAL ANALYSIS RATE: DAILY MAP (March 2021 to March 2022) (GRAPH 5)

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD

EUR / GBP rates experienced a false bullish breakout last week as they tried to climb through declining channel resistance in place by the December 2021 and February 2022 highs. But the return to the channel lacks strength, suggesting that the pair may not move back to the annual low of 0.8203 in the near future (except for a significant escalation in the Russian invasion of Ukraine, which could further commodity markets disrupting, and thereby further disrupting commodity markets, which increases inflationary pressures in the short term and forces the BOE’s hand back into a more aggressive stance). More clarity is needed before establishing a directional bias for EUR / GBP rates.

IG Client Sentiment Index: EUR / GBP Rate Forecast (24 March 2022) (Chart 6)

Euro Technical Analysis: Divergence between EUR / GBP, EUR / JPY, EUR / USD

EUR / GBP: Retailer data shows that 62.84% of traders are net long with the ratio of traders long to short at 1.69 to 1. The number of traders net long is 1.94% higher than yesterday and 52.02% higher from last week, while the number of traders net-short is 7.24% higher than yesterday and 27.67% lower from last week.

We usually have a conflicting view of crowd sentiment, and the fact that traders are only long indicates that EUR / GBP prices may continue to fall.

Positioning is less net long than yesterday, but more net long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR / GBP trading bias.

— Written by Christopher Vecchio, CFA, Senior Strategist

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button