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Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD


Euro Outlook:

  • Technical proof is accumulating that the Euro’s resiliency is within the rearview mirror.
  • A false bullish breakout could have transpired in EUR/USD charges, whereas each EUR/GBP and EUR/JPY charges have already began to push in direction of their month-to-month low.
  • Per the IG Shopper Sentiment Index, every of the key EUR-crosses have a special bias.

Interval of Resilience Ending

The Euro’s interval of energy and resiliency at first of 2022 could shortly be coming to an finish. Whereas EUR/USD charges skilled a bullish breakout earlier this week, there may be rising proof that the transfer is about to reverse. Coupled with a failure by EUR/GBP charges to advance meaningfully and EUR/JPY charges falling to contemporary month-to-month lows, it could be the case that EUR/USD energy has masked issues elsewhere. With elementary issues nonetheless abound – primarily, the European Central Financial institution’s refusal to boost charges within the face of excessive inflation – a contemporary wave of Euro promoting may very well be forward.

EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART (January 2021 to January 2022) (CHART 1)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/USD charges broke out larger from their two month-long triangle earlier this week, however didn’t advance meaningfully earlier than resistance was met in various kinds: the descending trendline from the Could and September 2021 swing highs; the 50% Fibonacci retracement of the 2017 low/2018 excessive vary; and the 50% Fibonacci retracement of the 2020 low/2021 excessive vary. However maybe most notably, the each day candlestick on Friday has taken the form of a bearish outdoors engulfing bar, and coming in after a breakout, means its additionally a bearish key reversal. A transfer again beneath 1.1380 would provide a powerful affirmation sign that EUR/USD’s bullish breakout as failed.

IG Shopper Sentiment Index: EUR/USD Price Forecast (January 14, 2022) (Chart 2)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/USD: Retail dealer knowledge reveals 48.99% of merchants are net-long with the ratio of merchants brief to lengthy at 1.04 to 1. The variety of merchants net-long is 8.45% decrease than yesterday and 13.32% decrease from final week, whereas the variety of merchants net-short is 2.84% decrease than yesterday and 17.10% larger from final week.

We sometimes take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests EUR/USD costs could proceed to rise.

Merchants are additional net-short than yesterday and final week, and the mix of present sentiment and up to date adjustments offers us a stronger EUR/USD-bullish contrarian buying and selling bias.

EUR/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (January 2021 to January 2022) (CHART 3)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/JPY charges failed to realize their double backside goal at 131.92, and with the pair breaking again beneath their each day 21-EMA whereas seeing contemporary month-to-month lows, a extra bearish transfer appears probably within the near-term. Momentum indicators are shortly turning decrease, with each day MACD issuing a promote sign (albeit above its sign line). Every day Sluggish Stochastics are dropping from overbought territory. The 50% Fibonacci retracement of the 2014 excessive/2016 low vary at 129.50 is the primary goal decrease, following by the 38.2% Fibonacci retracement of the 2018 excessive/2020 low vary at 128.68.

IG Shopper Sentiment Index: EUR/JPY Price Forecast (January 14, 2022) (Chart 4)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/JPY: Retail dealer knowledge reveals 33.33% of merchants are net-long with the ratio of merchants brief to lengthy at 2.00 to 1. The variety of merchants net-long is 8.98% larger than yesterday and 15.74% decrease from final week, whereas the variety of merchants net-short is 29.32% decrease than yesterday and a pair of.15% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests EUR/JPY costs could proceed to rise.

Positioning is much less net-short than yesterday however extra net-short from final week. The mixture of present sentiment and up to date adjustments offers us an extra combined EUR/JPY buying and selling bias.

EUR/GBP RATE TECHNICAL ANALYSIS: DAILY CHART (January 2021 to January 2022) (CHART 5)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/GBP charges proceed to carry beneath former channel help that was carved out between March and December 2021, unable to climb again above the 2021 low at 0.8368. It might thus seem that worth motion in 2022 has been accumulating right into a sideways vary, a flagging sample whose previous transfer to the draw back suggests additional losses within the coming classes. It stays that the case that “additional losses in direction of 0.8282 appear probably within the near-term.”

IG Shopper Sentiment Index: EUR/GBP Price Forecast (January 14, 2022) (Chart 6)

Euro Technical Analysis: Next Leg Lower Beginning? Setups for EUR/GBP, EUR/JPY, EUR/USD

EUR/GBP: Retail dealer knowledge reveals 80.88% of merchants are net-long with the ratio of merchants lengthy to brief at 4.23 to 1. The variety of merchants net-long is 1.28% larger than yesterday and 12.80% larger from final week, whereas the variety of merchants net-short is 3.02% decrease than yesterday and 1.75% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests EUR/GBP costs could proceed to fall.

Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date adjustments offers us a stronger EUR/GBP-bearish contrarian buying and selling bias.

— Written by Christopher Vecchio, CFA, Senior Strategist



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