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

The Euro showed strength this week helped along by the comment from Isabel Schnabel indicating that the next rate move from the ECB might be a hike rather than a cut. EUR/USD tests a massive spot of resistance as EUR/JPY trades at fresh all-time-highs.

The Euro continued to show strength last week and notably, that strength even showed against the British Pound. I had been following the latter as a more-attractive venue for USD-weakness scenarios but given price action in the final two days of the week, that may be shifting.

While EUR/USD was cautiously trading around prior November highs, GBP/USD had already built attractive bullish structure and this highlights the deviation between the pairs. But – as looked at in a Monday article on the British Pound, EUR/GBP was holding near a massive spot of support, and that hold ended up hanging on for a couple more days until a rally took over in the final days of the week.

In the major of EUR/USD, the pair has continued to test a big spot of Fibonacci resistance, spanning from 1.1686-1.1748. This zone came into play around the Q3 open and for the past five months has thwarted bulls from continuation pushes. The 1.1748 level held the highs on both Thursday and Friday and that remains the line-in-the-sand that bulls will need to deal with if they do want to exhibit control in early trade next week.

EUR/USD Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Daily

EUR/USD now has higher-high and higher-low structure on the daily chart and this keeps the door open for buyers to make a push. Notably, the CPI and NFP reports next week will probably bring a large push on USD flows and this can be considered as a major driver for EUR/USD. For support from the daily chart, it’s the 1.1686 Fibonacci level and the 1.1613 prior swing low that stand out as important.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/JPY Fresh ATH

I looked at this setup on Monday and at the time, 182.00 had held as a significant high and 181.50 was showing as shorter-term range resistance. I went over a couple different ways to approach the breakout, and that setup hit cleanly later in the week with prices eventually driving up to another fresh all-time-high.

The 182.00 level ended up holding a few different tests of support – with 182.50 then becoming resistance, followed by a rally up to 183.00. So far, the psychological levels have held inflections well, and this sets up for 182.50 to show as support for bullish continuation approaches into next week, with the Bank of Japan rate decision later in the week likely playing a large role.

EUR/JPY Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/GBP

The past month produced a notable pullback in EUR/GBP, just after the pair hit a fresh three-year-high. That pullback started to find support around prior resistance in the prior week, and then last week was largely continued recovery as buyers took a greater hold of the move on Thursday and Friday.

This keeps the door open for bullish continuation in the pair, and as looked at above, this can also speak to Euro strength in pairs like EUR/USD and EUR/JPY against GBP/USD and GBP/JPY.

For pullbacks in EUR/GBP, it’s the .8738-.8753 area that buyers need to retain to keep control of near-term trends in the pair.

EUR/GBP Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro