Strong NFP Data Keeping the EUR/USD in Bearish Mode

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Strong NFP Data Keeping the EUR/USD in Bearish Mode

Strongest NFP Data in 2014:

US Non-Farm Payroll (NFP) Data came in much stronger than expected, putting EUR/USD back into a bearish outlook.

NFP Employment Change (November): 321K
Forecast: 231K
Previous: 214K
nfp nov 2014
(click to enlarge; source: forexfactory.com)
For the first time since May 2010, the NFP employment change reading surpassed 300K. November’s reading was the 3rd strongest in 10 years as well. The strong jobs data reinforces the ability of the FOMC to raise rates mid-2015.

Average Hourly Earnings m/m: 0.4%
Forecast: 0.2%
Previous: 0.1%
Other than job numbers, wage increase will be needed for the FOMC to be able to raise rates. In November’s hour earnings grow by 0.4%, the strongest reading this year, matching April’s print. Along with the strong employment change data, this hour earnings data should give traders confidence that the FOMC will raise rates by mid-2015.

Today’s jobs data is giving the US Dollar a boost across the board. Let’s take a look at the EUR/USD:

EUR/USD 4H Chart 12/5
eurusd 4h chart 12/5
(click to enlarge)

Yesterday, we noted resistance up to the 1.2450 area where we saw the 100-, and 50-period SMAs as well as a falling speedline from November’s high near 1.26. (EUR/USD – Supported Above 1.23 After ECB; NFP on Tap) Now the market respected this resistance ahead of the NFP and then stalled around 1.2375. After the release of the jobs data, EUR/USD fell, and is threatening to make new lows on the year.

Price action is trading in a falling channel formed since mid-November. EUR/USD is also showing confirmation to a breakout below November’s consolidation range support around 1.2360. The range was about 220 pips. Using this as a projection, the downside target could be 220 pips below 1.2360, around 1.2140/1.2150.

EUR/USD Weekly Chart
eurusd monthly chart
(click to enlarge)

When we look at the monthly chart ,we can see that the decline has no barriers until the 2012 low at 1.2042. With the RSI in oversold territory, we should start expect some buying in the 1.20-1.2050 area for some consolidation action, especially if the ECB avoids QE. But if the ECB does implement QE, even the 1.20-1.2050 area is vulnerable.

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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.