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EURUSD: markets await NFP

Previous:

On Thursday the 2nd of August, trading on the euro closed down. By the time trading closed, the euro had dropped to 1.1582 against the greenback. The euro’s decline was catalysed by the dollar’s universal rise following the conclusion of the FOMC meeting combined with the selloff of risky assets as tensions between the US and China over trade turned up another notch.

US10Y bond yields are hovering around the 3% mark, with no signs of declining as of yet. The US Treasury Department has announced plans to increase the size of Treasury bond auctions.

US data:

  • Factory orders (Jun): 0.7% (forecast: 0.7%, previous: 0.4%).
  • Initial jobless claims (27 Jul): 218k (forecast: 220k, previous: 217k).

Day’s news (GMT 3):

  • 10:15 Switzerland: CPI (Jul).
  • 10:50 France: Markit services PMI (Jul).
  • 10:55 Germany: Markit services PMI (Jul).
  • 11:00 Eurozone: Markit services PMI (Jul).
  • 11:30 UK: Markit services PMI (Jul).
  • 12:00 Eurozone: retail sales (Jun).
  • 15:30 Canada: imports (Jun), exports (Jun).
  • 15:30 US: unemployment rate (Jul), nonfarm payrolls (Jul), average hourly earnings (Jul), average weekly hours (Jul), labour force participation rate (Jul).
  • 16:45 US: Markit services PMI (Jul).
  • 17:00 US: ISM non-manufacturing PMI (Jul).
  • 20:00 US: Barker Hughes US oil rig count.

Fig 1. EURUSD hourly chart. Source: TradingView

Current situation:

Yesterday, I said that the pair wouldn’t go any higher than 1.1705 due to the risk of dropping to 1.1615.

My concerns yesterday were not unfounded and reducing my risk to just 0.25% on my trade turned out to be justified. On the back of a rising dollar and euro sales, the pair dropped to 1.1582. Sellers broke two support levels: 1.1640 and 1.1607.

With mixed dynamics on the US dollar in Asia, buyers are trying to nurture some upwards movement. We’ll likely get a correction before 15:30 (GMT 3). About 80% of the time, the market either corrects itself or trades within a narrow corridor ahead of the payrolls report.

As it’s payrolls day, today’s review does not contain a forecast. This indicator is unpredictable and has a strong impact on the major currency pairs.

The statement by the FOMC following its meeting acknowledged that the jobs market is strong. If the payrolls report disappoints, the EURUSD pair will return to 1.1665. If more than 193k new nonfarm jobs were created in the US in June, you can expect the 157th degree (1.1559) to get attacked. There’s a key support level at 1.1510.

If we look at the AO indicator (with volume), then the 4 lower lows point towards a deep upwards correction for the pair. A deep correction for me would be a 50% bounce (1.1665) from the drop from 1.1746 to 1.1582. The 45th degree runs through 1.1639, and the 67th goes through 1.1663. The 50% coincides with the 67th degree. So, we await the NFP report. If you’re not in the market, don’t enter. If you’re already in, I hope you survive the NFP without a stop being triggered.


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