Euro Forecast: EUR/USD, EUR/JPY, EUR/GBP

Euro Talking Points:

• The beating continued in the single currency against the US Dollar last week, with some element of support finally showing up on Wednesday. The big question now is whether that can hold to allow for a broader pullback in both EUR/USD and DXY.
• EUR/JPY meanwhile showed a clean breakout from an ascending triangle formation and for Euro bulls, that can remain a more amenable avenue.
• It was an indecisive week for EUR/GBP but the build of an inside bar to go along with further stall highlights pullback potential in what’s been a consistently-bearish trend from the August highs.

EUR/USD remains in a fairly bearish state as we move towards the October close. This is in stark contrast to the bullish trend that build in the first two months of Q3 and grinded in the final month of the quarter. Sellers have come on fast so far in Q4 and for next week, this very much remains on centerstage as we get a couple of key pieces of US data. With Core PCE on Thursday and NFP on Friday, rates markets will get their next look at US economic performance and at this point the expectation remains for the Fed to cut at the final two meetings of the year, as highlighted in the US Dollar Price Action Setups article for this weekend.

In EUR/USD, a big spot of support did come into play last week, however, at the 1.0765 level. This is a Fibonacci level that was confluent with a bullish trendline taken from last year’s low. When it was initially tested, the pair was working on its 17^th red day out of the past 19, further illustrating that beating that the single currency has taken against the USD so far in Q4. I looked into this in the webinar and then again on Wednesday. The bounce extended through early-Friday trade but after Europe has closed for the week, bears have went back to work.

EUR/USD Daily Price Chart

Chart prepared by James Stanley, EUR/USD on Tradingview

EUR/USD Longer-Term

With a trend as strong as what’s shown in EUR/USD over the past few weeks, there’s little motive or rationale to question it. That doesn’t mean that strategizing around it will be simple, even if direction has been clear. Like we’ve seen with the most recent bounce, sellers have made a fast re-entry into the pair similar to what showed earlier in the week, when the 200-day moving average set the high after the weekly open before bears went right back to work.

From the weekly chart, the longer-term range remains clear. This puts focus on range supports around the 2024 lows of 1.0611-1.0643 and the 2023 lows around the 1.0500 handle. Along the way, the psychological level around 1.0700 is of interest.

Perhaps the more attractive scenario is if some element of pullback shows in the trend looked at above, allowing for lower-high resistance to hold around the 200-day moving average. That would make the case of longer-term range continuation, pointing towards those supports around 1.0600 or 1.0500 a more attractive option set.

EUR/USD Weekly Price Chart

EUR/JPY

Contrasting with that brutal sell-off in EUR/USD over the past few weeks, EUR/JPY remains in a bullish position. The pair opened the week with a trendline test after holding resistance at a Fibonacci level. But Wednesday trade showed a strong breakout from an ascending triangle with price pushing up to the 165.00 level.

The pair tried to pullback on both Thursday and Friday with each instance finding support at a prior resistance level of 163.90. This is perhaps even more impressive considering the support potential below that at the prior October resistance of 163.50. Friday trade is so far showing a doji which further highlights bullish continuation potential in the pair.

For next resistance, I’m tracking a Fibonacci level at 166.25. Notably, there’s Japanese general elections this weekend and that can add some additional volatility in Yen-pairs.

EUR/JPY Daily Price Chart

EUR/GBP

Sterling has had strength against the Euro for most of the past two months and, bigger picture, since early-2023 trade. But natural crosses like EUR/GBP can trade a bit differently than the major of EUR/USD or the cross of EUR/JPY, as the natural cross-border trade that exists between the economies can have impact on price action, particularly around big figures.

As a case in point, the current eight-year low in the pair is just a few pips above the .8200 handle. And, more recently, it’s the .8300 handle, which held the prior week low and remained defended last week.

Also of note, last week’s bar was an inside bar which can keep the door open for bounce potential.

EUR/GBP Weekly Price Chart

--- written by James Stanley, Senior Strategist