Market News & Analysis
Why the EURUSD rally can also extend
Tony Sycamore October 17, 2019 11:31 AM
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.
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
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