EUR/USD Breaks a Falling Trendline; Pre-NFP Outlook

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EUR/USD Breaks a Falling Trendline; Pre-NFP Outlook

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.

EUR/USD 4H Chart 2/4
eurusd 4h chart 2/4
(click to enlarge)

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.

EUR/USD 1H Chart 2/4
eurusd 1h chart 2/4
(click to enlarge)

ADP Non-Farm Employment Change (Jan.)
Forecast: 224K
Previous: 241K

Official Non-Farm Payroll Employment Change (Jan.)
Forecast: 231K
Previous: 252K

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.