This week’s main event risk for the USD will be Friday’s US NFP report. The EUR/USD and GBP/USD have stalled their rallies ahead of this release. Let’s take a look at the technical set ups.
The EUR/USD has been bullish at least since the middle of April, after the low on the month at 1.0520, which missed the low on the year made in the middle of March, at 1.0462.
The rally finally stalled today at 1.1392. There is a bearish divergence between price and the 4H RSI. We can expect a return at least to the 1.12-1.1210 area, which would test a rising speedline. If the market holds above 1.12 after tomorrow’s US jobs report, expect further upside in the EUR/USD towards the 1.1460 handle, an area discussed in our previous update on EUR/USD, when it broke above a pennant.
Now, to the downside, a break below 1.1065 would be needed to re-introduce the bearish outlook. The bearish outlook would be even more likely if there is a pullback that fails to climb back above 1.13, preferably holding under 1.12 (middle of this week’s range so far).
The GBP/USD 4H chart shows a market that has retreated after a rally from the low on the year of 1.4564 to 1.5492. The market is still maintaining the bullish bias as price hlds above the 100-, and 200-period SMAs, and above a rising trendline. The 4H RSI has also held above 40 for the most part, although it was briefly cracked. At least the bearish outlook is being shelved ahead of the US NFP report.
If price can climb back above 1.53 after tomorrow’s NFP, we are likely going to see further upside risk towards 1.5492 and then a support/resistance pivot area around 1.5550.
To the downside, it will likely require a break below at least 1.50, maybe even below 1.4950 to bring traders back to a bearish mode.
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