Last week, EUR/USD broke below a key support around 1.1270. This was a support within a consolidation range between the low on the year of 1.11 and roughly 1.15. After the breakout, the pair stalled around 1.12, but as we progress into this week, EUR/USD is now bleeding into the low on the year.
The 4H chart shows the breakout and extended slide. We are getting into the US session, and price is sitting right on top of that 1.11 low, threatening to open up fresh lows on the year.
The USD continues to strengthen into the US session as we get US jobs data.
ADP Non-Farm Employment Change: 212K
Previous: 250K (revised from 213K).
Perhaps, more important than the headline print was the upwards revision of the January number. A reading above 250K have been rare, so it was definitely a pleasant surprise. Besides, the 212K reading is still in the range of average forecasts, just at the lower part of the range. This validates the FOMC’s positive outlook on the jobs market.
For EUR/USD, today’s jobs data might not be enough to push it below 1.11. Or if it does, we should expect some intra-session consolidation ahead of tomorrow’s ECB statement and press conference.
European Central Bank Monetary Policy Statement:
The ECB is expected to roll out its QE program in March. The original plan is to run it through Sept. 2016. The market will be keen on the tone of the ECB, and whether it will acknowledge some recently better data. If the ECB gives a provision of adjusting the QE program based on strong data, we should expect EUR/USD to respect the 1.11 area as support. Otherwise, QE as planned should remind the market that the ECB and FOMC have diverging policy outlooks for this and the coming year. In this case, the EUR/USD should remain pressured towards the 1.10 handle.
Pullback Resistance: If there is a rebound, watch for resistance in the 1.12 level up to the 1.1270 area. If price can hold below 1.13, there is still bearish bias. If price climbs back above 1.13 however, we will need a very strong NFP report on Friday to prevent EUR/USD from heading to 1.15 again.
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