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EURUSD: drop to the trend line at 1.1380

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On Friday the 7th of July, the euro closed down. Before the nonfarm payrolls report was released, the rate was trading within a range of 1.1407 – 1.1427 (20 pips). There was high activity among speculators keeping an eye on the market as the jobs report was being released. First, the euro rate reacted with a 20-pip slide to 1.1384, followed by a 57-pip surge to 1.1440. The market underwent some sharp fluctuations in both directions in the 5 minutes to follow. Once market volatility had subsided, the euro fell to 1.1380.

In June, the US created 222,000 new jobs outside the agricultural sector after a forecast of 170,000. The figure for April was revised from 174,000 to 207,000 and for May from 138,000 to 152,000. The aggregate revision for the two months comes to 47,000.

The workforce participation rate grew from 62.7% to 62.8%. Unemployment rose slightly from 4.3% to 4.4% (forecast: 4.3%). The average hourly earnings index for the US in June grew by 0.2% (forecast: 0.3%, previous reading revised from 0.2% to 0.1%).

The dollar’s growth was initially held back by the weak growth in hourly earnings. As we can see from the session’s end, traders were refusing to sell their dollars. The euro/dollar rate closed at the 1.1400 mark. The dollar received some additional support from a growth in bond yields.

Day’s news (GMT 3):

  • 09:00 Germany – trade balance (May);
  • 11:30 Eurozone: Sentix investor confidence (Jul);
  • 17:00 USA: labour market conditions index (Jun);
  • 22:00 USA: consumer credit change (May).

EURUSD rate on the hourly. Source: TradingView.

The euro rate has fallen to 1.1380 from its high of 1.1440. The LB line and the 45th degree acted as reasonably good supports. The price is currently consolidating around 1.1405.

I haven’t gone for a Monday vs Friday scenario for two reasons. Firstly, the price movements following the payrolls report were not unidirectional. Secondly, a triangle has formed. This suggests that Friday’s movements will continue into today. I could be wrong, of course, but my ideal scenario today would be a slide for the euro to 1.1385/80.

A drop below 1.1380 would create a double top model on the hourly timeframe. There’ll be further analysis of the monthly and weekly timeframes in today’s trading idea.



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