Backdop: After the ECB announced QE, the EUR/USD fell sharply to 1.11, where it found support last week. It has since been drifting higher. And consolidated mostly between 1.13-1.14 before and after the FOMC statement.
The fact that the EUR/USD stayed resilient after a hawkish FOMC should be concern for both euro-bears and us dollar-bulls. Last week’s price action has made 1.13 a key level to break before the market revives the downtrend.
Today, price broke above last week’s consolidation range as well as a falling trendline coming down from December 2014’s high at 1.2570. Note that price has also cleared above the 50-period SMA, and is flirting with the 100-period SMA. The RSI has pushed to 70 showing short-term bullish momentum. At the same time, the RSI reading is signaling overbought conditions in the intra-session time-frame.
Ahead of Friday’s NFP, we should probably expect some resistance here at 1.1540, which was a support pivot in the previous consolidation.
Whether 1.1540 holds might depend on the upcoming ADP jobs report (2/4 US session) which precedes the NFP report on Friday. Traders often complain about the inaccuracy of using the ADP report to project whether the NFP report will surpass or miss forecasts. Nonetheless, a disappointing report could pressure the USD down a bit and allow EUR/USD to push through 1.1540. If this does happen, we should still limit the bullish outlook to 1.1650 ahead of Friday’s NFP.
Now, let’s say the ADP report is in-line with expectation or even a little better than expected. The EUR/USD should slid towards the 1.1325-1.1350 area, the middle of the recent coiling action. Again, ahead of the key jobs report on Friday, the bearish outlook for EUR/USD should be limited to the 1.1325 level.
ADP Non-Farm Employment Change (Jan.)
Official Non-Farm Payroll Employment Change (Jan.)
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