Euro, EUR / USD, EUR / JPY – Talking Points

  • EUR / USD hit a new low for the year before retreating into known territory
  • EUR /JPYhas a similar pattern to EUR / USD with decreased volatility
  • If the Euro can break the range against the USD or JPY, will it trigger larger moves?

EUR / USD TECHNICAL OUTLOOK

EUR / USD has moved sideways since hitting a low at 1.11861, which is just above the November 2020 low of 1.11682. These two levels can provide support.

This consolidation between 1.11861 and 1.13830 saw volatility plummet, as illustrated by the shrinking of the 21-day index simple moving average (SMA) based Bollinger Band. This could indicate a range trading environment as the end of the year approaches.

Another evidence of sideways price action is the convergence of short-term 10, 14, and 21-day SMAs.

When market ranges tighten, the Bollinger Band can be a signal to watch for a breakout in volatility. The initial breakout outside the 2 standard deviations band is a possible indicator of an emerging trend.

Close resistance could be at the 34 day SMA, currently at 1.13390. Beyond that, previous highs and pivot points at 1.13741, 1.13830, 1.15245, 1.16694, 1.16922 and 1.17557 are potential resistance levels.

Chart created in TradingView

EUR / JPY TECHNICAL ANALYSIS

EUR / JPY has a similar setup to EUR / USD, as it has moved sideways since hitting a low of 127.18 earlier this month. This level and the most recent low of 127.519 may provide support.

Here again, we can observe that volatility has collapsed as shown by the narrowing of the Bollinger Band. This could indicate a range trading environment as the end of the year approaches.

Once again, the Bollinger Band could be a signal to watch for a volatility breakout. The initial breakout outside the 2 standard deviations band is a possible indicator of an emerging trend.

Immediate resistance could be found at 128.30, where the 10 and 21 days simple moving averages (SMA) converge. It is also an area which has historical pivot points.

Previous highs and pivot points that might offer resistance are at 129.106, 129.638 and 130.083. The 55-day SMA also coincides with this recent high of 130.083.

The longer term 100 and 260 day SMAs are also converging just below 129.75 and that could be a potential resistance level.

EUR / JPY CHART

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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