EUR/USD – US Jobs Data and Triangle Breakout Scenarios

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EUR/USD - US Jobs Data and Triangle Breakout Scenarios

The EUR/USD fell to a new low on the year at 1.2360 last week and has since been consolidating. The 1H chart shows the pair trading in a triangle ahead of US jobless claims and JOLTS job openings data.

EUR/USD 1H Chart 11/13
eurusd 1h chart 11/13
(click to enlarge)

The 1H chart shows the EUR/USD without directional bias this week. But as the pair approaches the apex, it looks ready to spring out of the coiling action.

During the 11/13 US session, we will get a couple of jobs data that might help the pair breakout.

Jobless Claims
Forecast: 282K
Previous Week: 278K

JOTLS Job Openings (September)
Forecast: 4.81M
Previous: 4.84M
eurusd 1h chart 11/13

(click to enlarge; source: forexfactory.com)

Jobless claims data is becoming irrelevant. When it fell below 300K the USD was gaining across the board, but at this point, the FOMC has acknowledged improvements in the labor market in terms of employment and fewer people on unemployment. The JOLTS jobs opening data is more relevant in that it shows businesses hiring more. The trend has been strong and has picked up speed in the past few months. However the data is from September. What the FOMC really need to see before it can raise rates is wage growth.

Now going back to the EUR/USD, we should first acknowledge its prevailing downtrend and the divergence of monetary policy direction between the ECB and FOMC. With that in mind, let’s look at a few scenarios.

1) Jobs data is positive and surprise to the upside, especially the JOLTS reading, and the EUR/USD fall because of USD-strength. In this scenario, we are likely to see EUR/USD fall towards the 1.2360 low with risk of breaking lower. We should anticipate some tentativeness ahead of Friday’s German GDP data.

2) Job data is positive, but the EUR/USD does not fall to 1.2360, but instead rebounds and threatens or even break the triangle. This would show EUR-resilience, and show the market anticipating a decent German GDP report. Again, we should note expect the market to push above the high of the triangle around 1.2530 with the German GDP data looming ahead.

3) Job data is negative, and the USD falls. The EUR/USD should rally in this case to test the triangle highs around 1.2530. While there is a risk of breaking higher, we will need to wait until after the German GDP data to see if EUR/USD can make a price bottom out of this week’s price action.

4) Job data is negative, but the USD still gains and the EUR/USD falls. This would be the case if the jobs data is just slightly off but the market is still confident it won’t change the FOMC’s schedule for a rate hike come mid-2015. This should push EUR/USD to 1.2360, but again, we need to wait until after Friday’s German GDP data before assessing whether the triangle breakout will be sustained.

Basically, we should anticipate some short-term moves resulting from tomorrow’s jobs data, but the outlook should be limited until the reaction to German GDP data.

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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.