The most active pairing in the Euro is definitely the EURGBP. Brexit, ECB and BoE are all in the mix. Craig Erlam, Senior Market Analyst for Oanda discusses the technical layout of the currency and suggests that the Euro was overstretched leading in to the ECB meeting. However this is what was expected by the dovish stance held by the central bank. Craig says that “Barring any significant chance in data suggests that interest rates will raise sooner after the end of QE”. As a matter of fact Craig suggests that there is plenty of prosepct for the Euro to correct even more. The chart of the EURGBP is at a key technical level. From July onward the chart has been at a major zone of support. Conversely break of this level would be a particularly strong bearish signal. The Pound is in itself not particularly bullish as the expected rate hike is already priced in. EUR weakness could drive the pair even lower towards the next zone of support at 0.8650.
Yen and Dollar Pairs
Moving on Craig takes a look at the EURJPY. This chart shows very clearly that a bearish signal is waiting confirmation in the Euro. The technicals are poised for a downside, recently broke the rising trend lines. The break downward will be significant due to how often the it has held support. When we see the break of 131 or 131.50 that would be a very bearish signal.
Finally Craig takes aim at the EURUSD. Another chart that is not technically positive. The small head and shoulders move begun in September has now completed. On Thursday the chart broke through the neckline of a larger head and should formation begun in August. All of this points to much more downside. It could go down to 1.1450 or 1.1475. If the move downward is severe it could go down to 1.12 or 1.13.
The Dollar could end the year on a positive note. Whilst on the other hand the Euro could head lower and the ECB will be much happier for it.