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Forex Update: Euro Recovering Against Major Currencies

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2018 was a year to forget for the Euro. For almost the entire year, it corrected against major currencies such as the US Dollar and the Japanese Yen. While it performed well against the New Zealand Dollar, it significantly pulled back in Q4 of 2018.  

Nevertheless, the Euro looks to start the year with a bang as it begins to show signs of strength. In this article, we show how the Euro is recovering against major currencies.

Euro/US Dollar (EUR/USD)

The EUR/USD pair is telling us that it wants to climb higher.

While it corrected after touching a high of 1.25543 in February 2018, it is now giving us bullish technical action. The pair successfully flipped resistance of 1.14 into support in August 2018. Even though the market went below the support in November, bulls managed to recover it in December. This told us that the price action was a bear trap.

EURUSD 1W chart

With the recovery of the support, EUR/USD broke out of the falling wedge on the weekly chart. The breakout marks the end of the correction and the possible resumption of the uptrend against the dollar. If you plan to long the market, the target to look for after entering the market is 1.25.

Euro/Japanese Yen (EUR/JPY)

The EUR/JPY pair is showing that it wants to reverse its trend.

The market has been correcting after posting a 2018 high of 137.492 in February 2018. However, the corrective period might be coming to an end as EUR/JPY is currently printing a large hammer on the monthly chart. The long wick below the monthly candle’s body tells us that market participants are strongly rejecting lower prices.

EURJPY 1M chart

Another reason why the recovery is likely on the horizon for the pair is that it appears to be forming a second higher low. Also, the market seems to be respecting the 100 MA on the monthly chart. With these technical signals, it is likely that EUR/JPY will revisit 137.50 in the coming months.

A move above 137.50 will likely result in a strong bull run.

Euro/New Zealand Dollar (EUR/NZD)

The EUR/NZD pair is a market that wants to end its consolidation.

A look at the weekly chart shows that EUR/NZD has been trading sideways for over seven years. It is locked in a range between 1.50 and 1.80. However, recent price action shows that it might be ready for a range breakout.

Although the EUR/NZD retraced after generating a 2018 high of 1.79295 in October, it managed to respect the range midpoint of 1.65. The bounce was also supported by the 100 MA on the weekly chart.

EURNZD 1W chart

Currently, it is facing some resistance against the 50 MA. This might be an opportunity for you to buy the dip. As long as the market is above the range midpoint of 1.65, the likelihood of revisiting 1.80 and even breaking out of range is high.

Bottom Line

After a brutal 2018, it appears that the Euro wants to flex its muscles in 2019. It is showing strong reversal signals against the US Dollar and the Japanese Yen. In addition, it looks primed to break out of a seven-year range against the New Zealand Dollar. 2019 may be the year that Euro recovers against these three major currencies.

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.8 stars on average, based on 309 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Price Prediction: Bull Trap Pattern Complete in EUR/USD, New Lows Likely Ahead

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Still Diverging Economies, Converging Monetary Policies

While the long-term trend is still negative in the EUR/USD, the most traded forex pair had a very active start to the year, and it seemed that after a long period of weakness, will finally experience a meaningful counter-trend rally against the Greenback. The European common currency moved above key resistance in the wake of the dovish shift by the Federal Reserve, despite the disastrous industrial production reports and the dismal PMIs from the Eurozone.

The weakening US economic numbers also helped the rally attempt, but despite the move above 1.15, the currency failed to extend the move and it plunged back below resistance, to the previously dominant trading range, completing a bull-trap pattern which will likely lead to the continuation of the long-term trend, with all eyes on the previous low near 1.1215.

Long-Term Chart Analysis

EUR/USD, Daily Chart Analysis

Looking at the daily chart, the trend is clearly bearish in the pair, and even though the steeper of the two main declining trendlines have been briefly violated during the recent rally, which made a stronger counter-trend rally a possibility, the broader trendline is in no danger. The oversold MACD readings that developed in the pair have been cleared back in December, and now the indicator is bearish for the first time since early November.

There is considerable support in the 1.1275-1.13 zone, but given the lack of follow-through after the break-out attempt, and the competed bull trap pattern, odds clearly favor a new swing lower in the ongoing long-term downtrend. Targets for the move are found near 1.1135 and in the 1.0850-1.0950 zone.

Short-Term Chart Analysis

EUR/USD, 4-Hour Chart Analysis

The pair is slightly oversold from a short-term perspective, and a move back to 1.1440 is in the cards here. That said, given the proximity of the 1.15 level and the risk/reward ratio of a long-term trade, traders could enter right away, ignoring the short-term setup. A dip below the lower boundary of the broader consolidation pattern would further confirm the continuation of the long-term trend, but should the global risk rally continue, a period of range trading could still be ahead before a test of the lows near 1.1215.

Key Events Ahead for the Pair

Tomorrow we will have the US Industrial Production and Prelim Michigan Consumer Sentiment coming out. Next week, Tuesday will likely see all the US indicators which have been delayed because of the government shutdown, such as Retail Sales, Housing Starts, Existing and New Home Sales, and the Trade Balance. The Eurozone Manufacturing and Services PMIs will be out on Thursday, while all eyes will be on the ECB’s rate decision and the following press conference, and on Friday the Durable Goods report could cause a sizable move in the pair.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 443 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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GBP Price Prediction: British Pound Jumps on Growing Backing for PM May’s Brexit Deal Ahead of Vote

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  • GBP catches a bid across the board as Prime Minister Theresa May gains ERG support.
  • Despite session gains, GBP/USD technically has vulnerabilities to downside risks, given rising channel formation.

GBP Bulls Awaken

The British pound (GBP) saw a decent jump to the upside on Monday, after an initially very choppy directionless start to the session. The buying swooping into GBP/USD came on the back of a growing number of ministers set to back Prime Minister Theresa May. Specifically, attention was grabbed after closely followed political watcher Robert Peston tweeted that “influential Tory Brexiter MP tells me he and his ERG Brexiter colleagues will be voting with Theresa May and the government all day tomorrow”. This is significant as the ERG is a very influential Brexit research group, which was previously plotting ways to oust PM May.

GBP/USD jumped to its highest level seen since 22nd November. The pair had seen an initial spike of 85 pips to the upside. Gains were capped however by a known strong area of supply; this can be seen tracking from 1.2870 up to 1.2930. The price has not been above here since 15th November 2018, and the bulls having faltered here on several occasions attempting to move above. Should GBP/USD manage to move above this zone, it would be a very strong signal that it is out of the bear market. Technically, this would be largely attractive for inviting further buyers to come in.

A detailed analysis of the upcoming Brexit vote can be viewed here: This Tuesday Will Be Zero Hour For the British Pound

Price Remains Confined Within Channel

GBP/USD daily chart. Price action remains within the confinements of a rising channel.

Another key technical observation is an ascending channel formation, which can be viewed via the daily chart. The GBP/USD pair has been moving within this since 12th December 2018, having gained over 400 pips since it took shape. The daily candle today briefly spiked above the upper tracking trend line of the pattern. However, the price was squeezed back within the confinements of this. Touted profit-taking kicked in towards the close of the European markets. This is not too surprising, as participants maintain an element of caution heading into the high-profile vote.

Given the nature of the above-described formation, should it play out to the textbook, vulnerabilities still point to a breakout south. This move would be heavily assisted should the British Prime Minister lose the meaningful vote on Tuesday. In terms of key levels to note, to the upside, a break above the 1.2930 supply zone will invite large buying pressure. To the downside, a breach of 1.2650, the lower support of the channel, will open flood gates to selling.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

GBP/USD Price Prediction: GBP/USD Pump and Dump Eyed

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  • GBP/USD has been rallying heading into the crucial vote on Theresa May’s Brexit deal with the EU.
  • Markets could very well be making room for a big sell-off, depending on the outcome.

Markets Expect PM May to Fail

GBP/USD surprisingly has been making its way north, as the price on Friday made one final big push for the week. This comes despite the crucial vote on Tuesday 15th January, where UK parliament will vote on PM May’s EU deal. It appears the market is strongly anticipating the Prime Minister will lose this. As a result, the case for this is already being priced in.

Despite the fact the markets are expecting this sort of outcome, there could still very well be room for a large fall for GBP. This rally being observed may be the pump, making room ahead of it encountering a large dump. In terms of this type of behavior it has been seen time and time again ahead of big market moving events.

In these heightened times of uncertainty, both economically and politically, GBP/USD has still managed to close in the green for four weeks running. It has moved to its highest levels seen since week of 26th November. This has been the longest weekly run observed for the pair, going back as far as August 2018.

Key Technical Levels

GBP/USD 4-hour chart.

Looking via the 4-hour chart view, an ascending channel formation can be eyed, which has been in play since 11th December. Despite the freak mini touted flash crash on 2nd January that rippled the markets, GBP/USD has respected this pattern. The price has been grinding higher within this, having gained almost 400 pips.

The bull run on Friday was capped by the upper acting trend line, which is tracking at 1.2860-70. It did print its highest level since 22nd November in that latest squeeze higher. Given the further wave of uncertainty that will hit the market next week, the price will likely continue to respect this channel. Keeping in mind the recent rejection on Friday, price pressures to the downside could be eyed at the open. Support levels to note via the 4-hour; 1.2770, 1.2716 and then 1.2660.

GBP/USD weekly chart.

In terms of the weekly chart, should the bulls intend to resume the upside pressure, they will need to break down 1.2870. This is a resistance area and a break and close above can open the door for a return to the psychological 1.3000 mark. To the downside, big weekly levels to note are 1.2770 and 1.2660. Any failure of those mentioned holding, then a fast move back south to a demand zone tracking from 1.25-1.2400 is to be expected.

Featured image courtesy of Shutterstock.

 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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