steve.jarvis's picture

EURO into top half of rankings for first time in 6 months

The EUR was at or near the bottom of my major currency rankings for the first 4 months of the year, exiting 5 weeks ago and then settling into the neutral band for 4 weeks.  This week the EUR has improved further and is now into the bullish group of currencies, at the expense of NOK, which has exited from that bullish group (which also contains GBP, CHF & SEK) where it had stayed for 4 weeks.

The question is, will the current bout of EUR strength be sustained, or is this purely a short-term improvement which will not be long lasting?

To help have a clearer idea of which it will be, you need to look at not just EUR/USD (which gets most of the headlines) but the EUR against a wide range of currencies, as this will give a more balanced view, and one which is not overly influenced by the USD, which has it's own story to tell.

Over recent days, the EUR has pushed upwards through the 260 day (1 year) moving average against several Currencies, including JPY, CAD, AUD & NZD.  It remains below that moving average against the USD, GBP & CHF, while against the NOK & SEK recent price action has been in a range around that long-term trend line.  Looking to the MACD indicator, which can flag up trend changes before they become evident in the price action, the EUR has established rising highs & lows against most currencies. This essentially means one of two things:- either a loss of downwards momentum within a downtrend or confirmation of an uptrend.  Either way, this is positive for the EUR.

Turning to the short-term charts, the EUR versus the JPY, CHF, CAD, AUD, NZD & NOK has broken clear of recent highs, a positive sign, whilst against the USD, GBP & SEK it currently remains shy of recent highs, despite its recent strength.   In some cases, such as versus the AUD, NZD, NOK & SEK there are early signs of a possible setback, but at this stage the signals are weak and favour no more than a corrective dip, ahead of further broad EUR headway.

So which charts look best for the EUR?

At this stage, EURJPY & EURNZD would appear to have the most going for them, being further ahead in the recovery cycle than the likes of EURCAD, EURAUD & EURNOK which currently appear to be next best.  EURUSD, EURGBP & EURSEK show potential for a further recovery over the next week or two, but at present the signals are not in place for anything longer lasting and in the event that the EUR does start to weaken again, could be amongst the first to start breaking down again.

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