WWM - Analytics

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    Today’s Trading Edge: EUR/USD may return to 1.10 area on a strong Nonfarm payroll report

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    The greenback rallied for a third consecutive day against the euro as several European countries observed Ascension Day.  Yesterday, the ECB published their economic bulletin, which highlighted the economic recovery in euro area is continuing but risks remain tilted to the downside. 

    The recent rally from 1.0534 to 1.1615 was unable to break above the August 24th high of 1.1712.  The next major move with the currency pair may come from Friday’s nonfarm payroll report.  Consensus expectations for the April change in private payrolls is for a 200K reading, a decline over the 215K prior print.  Some analysts are lowering their targets following Wednesday’s ADP employment change that missed and came in at 156K, much lower than the eyed 195K.   

    Price action on the EUR/USD daily chart shows that price formed a bearish butterfly pattern on May 5th.  Point D was confirmed with the 141.4% Fibonacci expansion level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.  If we see US economy labor market have a strong print above 200K on Friday morning, we could see the US dollar have another major rally.  A strong employment report could help the Federal Reserve lean towards raising interest rates in June. 

    Currently price is strongly above all three key (200-, 100- and 50-day) SMAs.  Key support remains the 1.1250 level, with critical support coming from the 1.1000 to 1.1050 zone.  If we see a major miss with the payroll report, the bullish move may continue and target the key 1.1750 level.  Major resistance will come from the psychological 1.20 handle. 

    The trade: Sell EUR/USD 1.1450 with a stop loss at 1.5550 and a take profit at 1.150.  The Risk/Reward Ratio is 1:3. 


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