Trading on our main pair opened 2018 up. On the 2nd of January, buyers pushed the rate up to 1.2081. With the technical analysis providing no threats, buyers showed the fighting spirit to push higher. Their target was the 1.2092 high from the 4th of September, 2017.
After a downwards correction to 1.2001, buyers shifted the maximum from 1.2081 to 1.2089 before running out of steam. After a 14-hour period of consolidation, traders started to cash in on their long positions ahead of Friday’s payrolls. The report showed that jobs growth in December had slowed more than expected.
148,000 new jobs were added in the US in December against a forecast of 190,000. The figure for October was revised downwards from 244,000 to 211,000, while November’s reading was revised upwards from 228,000 to 252,000. This gives us an aggregate revision of -9,000.
Reports are also showing an increase in monthly salaries and low unemployment. Unemployment came out at 4.1% as expected. The average hourly earnings index for December inched up by 0.3% against a forecast of 0.2%. The workforce participation rate is 62.7%.
Markets reacted by shorting the dollar before traders started taking profit after an unsuccessful attempt at breaking the 1.2080 – 1.2090 resistance. The euro dropped to 1.2021
Day’s news (GMT 3):
- 10:00 Germany: factory orders (Nov).
- 11:15 Switzerland: CPI (Dec).
- 11:30 UK: Halifax house prices (Dec).
- 12:30 Eurozone: Sentix investor confidence (Jan).
- 13:00 Eurozone: retail sales (Nov), consumer confidence (Dec).
- 21:35 USA: FOMC member Williams’ speech.
- 23:00 USA: consumer credit change (Nov).
Fig 1. EURUSD hourly chart. Source: TradingView
At the time of writing, the euro is trading at 1.2017. What’s going on here? After rebounding from 1.2089, a double top formation appeared on the daily timeframe. For this formation to be completed, sellers need to get the rate back under 1.20. Monday’s trading should range between 1.2000 and 1.2090. 1.2000 level is bolstered by the TR2 trend line.
Given that the euro closed down after Friday’s payrolls report, for today I‘m expecting a flat with an upwards shift against Friday’s movements. Seller activity ahead of the opening of the European session always gives me cause for concern. Taking the daily picture into account, we should be ready for a breakout of 1.20. This means that it’s worth reducing your volumes for long positions if you’re trend trading.