EUR/USD CHF/JPY Medium Term Outlook

EUR/USD CHF/JPY Medium Term Outlook


Is the EURO gearing up for a test of $1.2550?

Well only time will tell as no one knows what will happen in the markets. But that does not stop one to remain curious and explore the analytical tools available at one’s disposal. This week we take a look at the EUR/USD exchange rate from an Elliot wave prospective.

Firstly this morning’s IFO data has beaten economists expectations with all three indicators climbing upwards.

Indicator Previous Expected Actual
Current Assessment 89.2 88.9 90.6
Expectations 91.1 91.8 94.2
Business climate 90.1 90.5 92.4
Source Bloomberg Economic Calendar

Elliott Wave count continues to show an incomplete sequence. The exchange rate is currently trading in the (5th) wave of an impulse, momentum divergence has started to appear which is also a recruitment for a 5th wave about to terminate. The wave model continues to suggest higher prices ahead.

Moving onto EUR/USD weekly chart technical outlook.

EUR/USD weekly chart EUR/USD Weekly

EUR/USD weekly momentum indicators continue to rally in bullish territory. However, the interesting piece of item is the golden cross forming on the weekly chart as the 50 day simple moving average(red) has crossed the 200 day simple moving average(white). The golden cross is one of the classical signs of higher prices ahead. With that in mind, obstacles remain as the USD side of the equation can not be neglected. US yields continue to march higher even while the US dollar remains heavily Net-short, which continues to create risks of a short squeeze.

CHF/JPY (Weekly) Caution Ahead!

CHF/JPY weekly chart CHF/JPY Weekly

CHF/JPY has been rejected around the 118.30 level as shown by the gravestone doji candlestick pattern on the weekly chart. It is worth noting the market has been struggling around the 118.50 level for the last 5 years, which continues to highlight the strength of the resistance. At the same time momentum indicators are also diverging from the price action. We do not predict reversals, despite when a blend of technical signals appear at an important supply or demand level, one should not ignore. This could be an important area for longs to scale out of trades.