The much stronger than expected US Non-Farm Payrolls last Friday increased speculation that the Fed would taper current QE stimulus program. This drove USD stronger and pulled EUR/USD down, pulling prices to a low of 1.3318 on Friday.
However, the decline of Friday is a dwarf compared to the great sell-off on Thursday following the ECB rate cut where prices fell from above 1.35 to below 1.33. However, prices did recover significantly, suggesting that support for EUR/USD is strong, and even imply that prices may have trended sideways if not for the rate cut. The same could be said about the reaction post NFP where prices have been trading mostly between 1.335 – 1.337.
Nonetheless, overall pressure remains bearish, and as along as prices stay below the descending trendline that is still in play, we can expect slight technical pressure which may be able to push price back to 1.330. Bearish objective below 1.330 may be harder considering that Stochastic readings will definitely be within the Oversold region when that happens, favoring a rebound scenario which may open up even more bullish target should the descending trendline be broken. Considering that the surprise ECB rate cut did not manage to breach 1.33, it becomes even less likely that a 1.33 break based on current momentum will be able to get the job done.
Long-term chart is currently favoring a bearish move, with 1.37 resistance level holding coupled with the bearish rejection off the trendline and Stochastic’s bearish cycle signal adding strength to the bearish momentum. However, it should be noted that prices remain above Jan’s opening levels, hence the overall bias should remain bullish which would render current bearish sell-off as a mere corrective move. Nonetheless, there isn’t any sign that current bearish momentum is reversing or even slowing down. Hence, should prices manage to break 1.33, a move towards 1.31 is still possible even though this is merely “corrective”, as that would be the next level of significant support. Beyond that will be unlikely based on this singular move alone as Stochastic readings will likely be within the Oversold region.
Week in FX Americas – Jobs Here, Jobs There, Jobs Everywhere
Week in FX Europe – ECB Pulled The Trigger And Kept The Door Ajar
Week in FX Asia – Commodities Focus On Chinese Plenum Expected Reforms
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