Euro Continues to Bleed; EUR/USD, EUR/JPY and EUR/GBP

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Euro Continues to Bleed; EUR/USD, EUR/JPY and EUR/GBP

During the 1/22 session session, the ECB announced details to the the much anticipated QE program and they did not disappoint and dragged down the euro. With a pace of $60 billion euros a month from March to at least September next year, Mario Draghi and his colleagues have laid out at least $1.1 trillion euros for sovereign bond purchases.

The EUR/USD consolidated ahead of the event risk as we can see in the 4H chart. After the announcement, the market sold the euro sharply and the EUR/USD has now fallen to almost 1.10. A this point, if there is any pullback, be aware of resistance in the previous support area around 1.15.

EUR/USD 4H Chart 1/23
eurusd 4h chart 1/23
(click to enlarge)

When we take a look at the monthly chart, we can see that price was at 61.8% fibonacci retracement level at 1.12. The RSI is in oversold condition. There has been a choppy decline since 2008, but there was an uptrend from 2001-2008, so in the long-term, EUR/USD can be said to be “neutral”. Because it is not considered bearish in the long-term, we might want to anticipate a period of consolidation/bullish correction now that the market is trading around the 61.8% retracement level.

Again, if there are any bullish outlooks, first limit it to 1.15. Now the next key support below 1.10 is the parity level, 1.00.

EUR/USD Monthly Chart 1/23
eurusd monthly chart 1/23
(click to enlarge)

Let’s take a look at some other long-term charts:

EUR/JPY Monthly Chart
eurjpy monthly chart 1/23
(click to enlarge)

Due to the Bank of Japan’s deep and persistent stimulus action, the Japanese Yen has been bearish across the board for a while now. It did start to consolidate in December and through January. The EUR/JPY monthly chart shows a sideways market in the long-term that has been bullish since 2012. However, this bullish outlook has ended by the price action in the past couple of months. In the short-term, the 128.80-130 area contains support factors including 38.2% retracement. Below that, the 120-121.83 area contains the next set of key support factors including the 50% retracement level. Let’s limit the bearish outlook to 50% retracement for now, unless the BoJ shifts monetary policy away from its currently loose stance.

EUR/GBP Monthly Chart
eurgbp monthly chart 1/23
(click to enlarge)

The EUR/GBP has also been falling sharply. The monthly chart shows the pair approaching key support factors .There is a previous resistance pivot in the 0.72-0.72555 area , which also involves the 61.8% retracement.

To the upside, if there is a pullback, watch out for resistance in the 0.7750-0.78 area, which was previous multi-month support.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.