Why the EURUSD rally can also extend

In an article published on Monday https://www.cityindex.com.au/market-analysis/on-watch-in-eurjpy/ we outlined the reasons why we thought EURJPY was bottoming and wrote that a break and daily close above 120.00 would be a bullish development looking for a move towards 123.50/124.00. EURJPY is what is referred to as a cross rate meaning it consists of two currencies, neither of which is the U.S. dollar. When I am reviewing a cross rate I always analyse the charts of the two currencies in isolation.

In an article published on Monday https://www.cityindex.com.au/market-analysis/on-watch-in-eurjpy/ we outlined the reasons why we thought EURJPY was bottoming and wrote that a break and daily close above 120.00 would be a bullish development looking for a move towards 123.50/124.00.

EURJPY is what is referred to as a cross rate meaning it consists of two currencies, neither of which is the U.S. dollar. When I am reviewing a cross rate I always analyse the charts of the two currencies in isolation.

The easiest way to do this is by examining the chart of each currency against the U.S. dollar. Therefore, for EURJPY, I looked at the charts of the EURUSD and USDJPY separately to make sure my technical view of the individual pairs aligned with my overarching view of the EURJPY cross rate, which they did.

In yesterday's note, we outlined the reasons why USDJPY should extend its recent rally. In this  article we complete our analysis of the currency pairs that make up the EURJPY cross rate with an overview of the EURUSD and why it can continue to rally.

This follows on from our suggestion in Mondays Week Ahead video https://www.cityindex.com.au/the-week-ahead/ at the 5 minute and 50 second mark to “buy pullbacks in the EURUSD towards 1.1020/00.”

The reason for our buy recommendation, late last week the EURUSD broke above the downtrend resistance coming from the June 1.1412 high, on the back of a rally in GBPUSD on hopes of an end to the Brexit saga. After falling to a low of 1.0991 earlier this week, the EURUSD received a further boost overnight, closing above 1.1070 following surprisingly soft U.S. retail sales data and supported by a rise in the yield on the German bund.

Technically, the EURUSD now appears set for a run at the 1.1111 high of September, with scope towards the resistance coming from the 200 day moving average at 1.1210. We would use this opportunity to raise the stop loss on longs to 1.0970ish and look to take profit, scaling out at the topside resistance levels mentioned above.

Why the EURUSD rally can also extend

Source Tradingview. The figures stated are as of the 17th of October 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.