On Friday the 4th of August, trading on the euro closed 95 pips down against the dollar. The pair consolidated around 1.1880 up until the NFP report. The strong US labour data led buyers to close their short positions on the dollar. The euro dropped 148 pips to 1.1728 in the space of 3 hours as a result of triggered stop levels.
The US Department of Labour announced an increase of 209,000 in the workforce in July outside the agricultural sector against a forecast of 183,000. The value for May was revised from 152,000 to 145,000 and for June from 222,000 to 231,000. The net revision comes to 2,000. Unemployment fell to 4.3% (-0.1%). Average hourly earnings rose from 0.2% to 0.3% with the workforce participation rate rising from 62.8% to 62.9%.
This favourable jobs report increases the likelihood of a rate hike by the Fed in December this year. According to CME’s FedWatch, as of the 4th of August, the probability of a rate hike had risen to 46.8% against 42.8% the previous day. Now it’s down to 45.5%.
Day’s news (GMT 3):
- 09:00 Germany: industrial production (Jun).
- 10:00 Switzerland: foreign currency reserves (Jun).
- 10:15 Switzerland: CPI (Jul).
- 10:30 UK: Halifax house prices (Jul).
- 11:30 Eurozone: Sentix investor confidence (Aug).
- 17:00 USA: labour market conditions index (Jul).
- 20:25 USA: FOMC member Kashkari’s speech
- 22:00 USA: consumer credit change (Jun).
EURUSD rate on the hourly. Source: TradingView
A large volume was recorded during this drop. One could say that this increase in volume was brought about by traders selling the euro after the NFP report and the subsequent triggering of protective stops on long positions. The rate stopped falling at the 135th degree and lower D3 line. The market closed at 1.1773.
So, what can we expect from the euro this week? I’ll start with the fact that a candlestick with a small bullish body at the bottom and a long upper shadow has formed on the weekly timeframe. The market is sending out signals of its readiness for a downwards correction. The Stochastic crossed downwards a week ago. At the moment, techies aren’t taking notice of this because oscillators don’t work against the trend. One week isn’t enough to start talking about a reversal. The NFP effect is short-term, so if consolidation is delayed for a couple of days, the euro will bounce back.
For today, I’m imagining something like this: growth to 1.1813 (just above the 67th degree) followed by a drop to 1.1755. By 14:00 (GMT 3), the LB balance line should approach 1.1820 (additionally strengthening the area around the 67th degree). Be ready for the 1.1728 low to be renewed. There’s no important data coming out today.