Euro, EUR / USD, EUR / JPY Speech points:
- Euro has been in an aggressive bearish state for the past two months, fueled by recent concerns around Covid and the potential for more locking and protests to those closures across the continent.
- EUR / USD is proving to be an important place of support, but if the risky trade involves markets, EUR / JPY may actually be more attractive on the short side.
- The analysis contained in an article depends on price action and diagram formations. To learn more about price action or chart patterns, take a look at our DailyFX Education section.
Europe continues to struggle through Covid and while the pandemic remains a global concern, the fragile state of the European economy makes this a potentially disastrous scenario for the European continent. And while the Fed and the BoC and even the RBNZ have supported higher tariff protocols, or at least the idea of them, the ECB remained loose and passive while the entire European recovery lagged behind that of their trade counterparts.
The euro has been a tough sell-off against the U.S. dollar since the peak in May. This top developed around 14.4% Fibonacci rebuke of the major move 2017-2018, and the 61.8% mark from that same study is what came in the past week to help keep the low. This intrigues around 1.1187 and it synchronizes with another Fibonacci retracement, the 61.8% mark of the “lifetime move” in the pair, which resides at 1.1212.
This zone was last in play a year ago, holding higher bearish support after a recovery began and this occurred after the same area held as resistance in late-2019 trading.
The question now is whether this place can suffice as support or whether it is a mere speed on the train-lower EUR / USD.
EUR / USD Weekly Price Chart
Diagram prepared by James Stanley; EURUSD on Tradingview
EUR / JPY
For those looking to take a bearish stance on the risky trade along with the Euro, EUR / JPY may remain interesting.
If we, in fact, see a major disruption caused by Covid variations and an increase in Covid numbers, then logically we will see rates continue to retreat. If that happens, the appeal of short-in-port trades is no longer as attractive, and as history has shown, this can lead to some fairly rapid unfolding scenarios that bring in-force.
If the Euro remains weak to keep up with that Yen force, this could make an aggressive move on the short side of EUR / JPY.
The couple is currently working on a bassist swallowing candlestick for the month of November with less than two days remaining, and there is a large price of support in-play currently around the current nine-month lows.
A failure of that level opens the door to push down to 126.76, but this is a messy 118-pips because there were a few wicks in this neighborhood as prices ground higher around the New Year open.
EUR / JPY Weekly Price Chart
Diagram prepared by James Stanley; EURJPY on Tradingview
— Written by James Stanley, Chief Strategist by DailyFX.com
Contact and follow James on Twitter: @JStanleyFX