- The Euro has been experiencing a countertrend rally against the trio of commodity currencies in recent weeks. Longer-term technicals remain bearish, however.
- It just so happens that June has been the best month of the year for the Australian, Canadian, and New Zealand Dollars, a meaningful burden for EUR/AUD, EUR/CAD, and EUR/NZD rates.
- According to the IG Client Sentiment Index, EUR-crosses have a mixed bias in the near-term.
Euro versus Commodity Currencies is a Mixed Picture
The Euro has, generally speaking, experienced quieter trading conditions relative to some of its other major counterparts. Thanks to a retrenchment in both global bond yields and commodity prices, the Euro has been quietly racking up gains against the trio of commodity currencies. But amid the countertrend rallies, the fact of the matter is that not much progress has been made for any of EUR/AUD, EUR/CAD, and EUR/NZD rates.
Each of the pairs remain in the throes of the longer-term bearish technical considerations, and in light of the fact that June has been the best month of the year for the Australian, Canadian, and New Zealand Dollars in recent history, it is thus the case that traders should be hesitant about any near-term upside. Instead, gains among EUR/AUD, EUR/CAD, and EUR/NZD rates may prove to be selling opportunities before the next legs lower.
EUR/AUD RATE TECHNICAL ANALYSIS: DAILY CHART (January 2017 to June 2021) (CHART 1)
The rally by EUR/AUD rates has slowed, although the rising parallel channel from the 2021 low remains in place, with the pair continuing its advance from support in the form of the ascending trendline from the August 2012 and April 2017 lows. But momentum has started to turn, suggesting a retest of the near-decade long uptrend may soon result. EUR/AUD rates are intertwined among their daily EMA envelope, which is in neither bearish nor bullish sequential order. Daily MACD is trending lower while above its signal line, and daily Slow Stochastics have dropped below their median line; daily Slow Stochastics had previously held above the median line since the second week of May.
EUR/CAD RATE TECHNICAL ANALYSIS: WEEKLY CHART (October 2008 to June 2021) (CHART 2)
Taking a step back to the weekly timeframe for EUR/CAD rates, it’s evident that bearish momentum remains firmly in place. The pair remains below its weekly 4-, 8-, 13-, and 26-EMA envelope, which is in bearish sequential order. Weekly MACD is moving sideways in bearish territory, and weekly Slow Stochastics are holding in oversold territory. It’s noteworthy that both momentum indicators have started to relieve their oversold readings yet there hasn’t been a subsequent recovery in EUR/CAD rates (typically a longer-term bearish development).
For now, EUR/CAD has not yet reached ascending trendline support from the August 2012 and February 2020 lows, which comes closer to 1.4700 this month. The pair continues to consolidate in a multidecade symmetrical triangle dating back to the December 2008 and March 2020 highs, which in reality can be drawn even further back to the implied EUR/CAD rate at the March 1995 high. A big move may be coming soon – just not quite yet (although the Bank of Canada and European Central Bank rate decisions in the coming days should stir some volatility in this specific pair).
EUR/NZD RATE TECHNICAL ANALYSIS: DAILY CHART (March 2019 to June 2021) (CHART 3)
EUR/NZD rates haven’t done much of anything over the past three months following the break of the downtrend from the March and September 2020 highs. The pair has not been able to clear the 23.6% Fibonacci retracement of its 2020 high/2021 low range at 1.7184, and as it’s been noted previously, “that’s to say that the recent rally is unconvincing and may be more or less a ‘dead cat bounce.’”
Something’s got to give soon, though, if trading is a function of price and time: EUR/NZD rates are pressuring sideways range resistance or starting to funnel into the vertex of an ascending triangle. Failure to achieve meaningful upside progress in the next few weeks (prior to mid-July) would be a warning sign that buyers have been exhauster and a return to the yearly low near 1.6329 becomes increasingly likely thereafter.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.