On the
daily chart below, we can see that EURUSD has sold off pretty heavily from the
1.1033 resistance as US
economic data in May beat expectations and made the market to reprice interest
rates odds on the hawkish side. The bias is clearly bearish with the moving averages crossed
to the downside and EURUSD printing lower lows and lower highs.
The
support level at 1.0700 is giving EURUSD bears a hard time as we need more
strong data to price in something more hawkish now, and therefore a pullback
may be due. If this is a major double top, we
should see EURUSD falling to the 1.0533 support eventually as that would be the
neckline of the pattern. The divergence between
the two highs with the MACD also
strengthens the case for more downside to come.
EURUSD Technical Analysis
On the 4
hour chart below, we can see that EURUSD has been trending downwards within a
falling channel. Recently, the price started to diverge with the MACD coming
into the 1.0700 support. This is a sign of weakening momentum often followed by
pullbacks or reversals.
Yesterday,
we got a big beat in US Job Openings which
made the EURUSD fall even more, but soon after some Fed members hinted to a
pause in June and the price quickly reversed and made new highs.
Today, the key data on
the calendar is the US Jobless Claims and the ISM Manufacturing PMI report.
However, it is unlikely that positive or negative data will significantly
impact the market, considering the recent statements made by Fed members.
Perhaps only a substantial deviation from expectations would have the potential
to generate market movements.
On the 1 hour
chart below, we can see that we have a downward trendline where
the price got rejected off of the last time it pulled back. Moreover, we have
also the 1.0711 support now turned resistance. This
will be the level to watch for traders today as the sellers are likely to lean
on it with a defined risk just above it to target another lower low. The
buyers, on the other hand, will want to see the price breaking higher to pile
in and extend the rally towards the 1.0760 level first and 1.0830 next.
Tomorrow, all eyes will be on
the US NFP report. Should the data reveal positive outcomes coupled with
higher-than-expected average hourly earnings, it could potentially increase
market odds for a June rate hike and even price some for a July hike. This
scenario might raise concerns within the market regarding a potential wage
price spiral.
Conversely, if the data is
favourable but falls short of expectations in terms of average hourly earnings,
it should weaken the USD further as it shouldn’t change rates pricing much and
the market will look forward to the CPI report next week.
In the event of unfavourable
data, it should be perceived as negative news. However, given recent Fed
officials’ comments, we should see EURUSD rallying as rate hikes from the Fed
get priced out.
This article was written by ForexLive at www.forexlive.com.