Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook – DailyFX | Omd Cialis

Euro outlook:

  • The euro remains structurally weak across the boardnotwithstanding the recent recovery in EUR/USD rates.
  • EUR/JPY has hit its lowest level since mid-May, while EUR/GBP has broken the uptrend from the March and April lows.
  • Per the IG Customer Sentiment Index, EUR/JPY and EUR/GBP interest rates have a bearish bias, while EUR/USD interest rates have a mixed bias.

Dollar Masking Issues

The euro has slipped for most of the past two weeks, plagued by two main problems: the European Central Bank’s attempt to counter inflationary pressures while preventing bond market fragmentation; and growing fears of stagflation as energy prices remain high and growth slows. As the July Fed meeting helped curb the US dollar rally, the strength in EUR/USD is more a result of greenback weakness than euro strength.

A look around the EUR crosses suggests that structural issues – both fundamental and technical – remain after the bullish opportunity faded late last month. Despite their recovery, EUR/USD prices failed to break above any major resistance. EUR/JPY has fallen to its lowest level in more than two months, while EUR/GBP has broken a multi-month uptrend.

EUR/USD TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (GRAPH 1)

EUR/USD failed to clear the 1.0278 21st July high and today’s reversal is taking the form of a bearish outside engulfing bar, signaling a short term high. The pair has fallen back below its daily EMA envelope, which is neither bearish nor bullish sequential. The daily MACD’s recovery below its signal line is fading, while the daily Slow Stochastic’s return to overbought territory appears to be short-lived. A return to last week’s low around the July Fed meeting at 1.0097 is not ruled out.

IG Client Sentiment Index: EUR/USD Rate Prediction (2 Aug 2022) (Chart 2)

Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook

EUR/USD: Retail trader data shows that 60.22% of traders are net long, with the ratio of traders long to short standing at 1.51 to 1. The number of traders net long is 2.90% higher than yesterday and 11.46% lower than last week, while the number of traders net short is 10.24% lower than yesterday and 12.72% higher than last week is.

We usually view crowd sentiment as contrarian and the fact that traders are net long suggests that EUR/USD could fall further.

Positioning is net-longer than yesterday but less net-long than last week. The combination of current sentiment and recent changes gives us another mixed bias in EUR/USD trading.

EUR/JPY TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (GRAPH 3)

Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook

It was noticed last week that “a deeper pullback into the range between the July low and the 38.2% Fibonacci retracement of the March low/May high around 136.68/86 is still possible”. EUR/JPY fell even lower, hitting 133.39 today, its lowest since mid-May. However, today’s price action has created a long lower wick on the daily candlestick, suggesting that short-term sellers are exhausted. Notwithstanding, momentum remains clearly bearish, suggesting that a sell-the-rally mentality is still appropriate. EUR/JPY rates are still below their daily 5, 8, 13 and 21 EMAs and the EMA envelope is aligned in bearish order. The daily MACD is trending lower below its signal line, while the daily Slow Stochastics remains in oversold territory.

IG Client Sentiment Index: EUR/JPY Rate Prediction (2 Aug 2022) (Chart 4)

Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook

EUR/JPY: Data from retail traders shows 43.17% of traders are net long, with the trader short to long ratio at 1.32 to 1. The number of traders net long is 2.43% higher than yesterday and 25.87% higher than last week, while the number of traders net short is 14.62% lower than yesterday and 25.17% higher % lower than last week.

We usually view crowd sentiment as contrarian and the fact that traders are net short suggests EUR/JPY rates could continue higher.

Still, traders are less net short than yesterday and compared to last week. Recent sentiment changes are warning that the current EUR/JPY price trend may soon reverse to the downside, although traders remain net-short.

EURGBP TECHNICAL ANALYSIS: DAILY CHART (February 2021 to August 2022) (GRAPH 5)

Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook

In the previous update It was noted that “focus is on the area around the July low and 61.8% Fibonacci retracement of the March low/June high near 0.8401/03”. EUR/GBP rates broke this support, breaking the uptrend from the March and April swing lows in the process. With momentum still bearish – the pair is below its daily EMA envelope (which is in bearish sequential order) – the daily MACD is still falling below its signal line and the daily Slow Stochastics are in oversold territory – further losses in Direction of the 76.4% Fibonacci retracement from the March low/June high at 0.8325 is possible in the near term.

IG Client Sentiment Index: EUR/GBP Rate Prediction (2 Aug 2022) (Chart 6)

Euro Technical Analysis: EUR/GBP, EUR/JPY, EUR/USD Price Outlook

EUR/GBP: Retail trader data shows 69.54% of traders are net long, with the long to short trader ratio standing at 2.28 to 1. The number of traders net long is 4.45% higher than yesterday and 31.63% higher than last week, while the number of net short traders is 0.44% higher than yesterday and 27.80% higher is lower than last week.

We usually view crowd sentiment as contrarian and the fact that traders are net long suggests that EURGBP rates could fall further.

Traders are net longer than yesterday and last week and the combination of current sentiment and recent changes gives us a stronger EURGBP bearish contrarian trading bias.

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— Written by Christopher Vecchio, CFA, Senior Strategist

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