EUR/USD Daily Forecast – Euro Rally Stalls at Major Resistance

Market Participants Await US Jobs Data

EUR/USD attempted to break above a fairly significant resistance area on Thursday but could not hold the upside as a sell-off during the US session wiped out gains for the day. The latest American job figures are due for release later today. The reaction to this report should clarify where EUR/USD is headed from here

Thursday’s ADP jobs report revealed an additional 195 thousand workers in the United States during August. The figure was ahead of the analyst estimate, although the change in the number of employed people in July was revised down a bit. The ADP sets a slightly higher bar for today’s jobs report which comes from the Bureau of Labor Statistics.

Analysts are expecting the report to reflect 163 thousand new jobs created in August which is lower than the 224 thousand new jobs in July. The unemployment rate is expected to remain unchanged, for a third straight month, at 3.7%.

Average hourly earnings are expected to have increased by 0.3% as it did in the prior month. I think this is an important aspect of the jobs report as it reflects upward pressure on wages, and in turn, upward pressure on inflation. Considering that one part of the Federal Reserve’s dual mandate is keeping prices steady, this component tends to have an influence on monetary policy decisions.

Technical Analysis

Earlier this week, I wrote that EUR/USD is in a technical breakdown after consolidating in a broad, slightly downward, range for more than a year. Yesterday, the exchange rate tested the breakout point of this range.

This breakout point comes in at 1.1150 and if the pair manages to rally above it, and hold there on a sustained basis, it would invalidate the view of technical breakdown. On the other hand, if the pair reverses lower from here, the view remains intact. In this context, this appears to be a significant area for the currency pair.

The chart above illustrates the breakout. Note the two levels in play, 1.1033 and 1.1053. The former held EUR/USD higher in early August, and the latter supported it late August. The 100 moving average has also come into play on a 4-hour chart.

EUR/USD posted a bullish candlestick pattern on a daily chart on Wednesday, but a bearish one on Thursday. For this reason, the pair continues to show some conflicting technical signals.

A directional bias should be clarified by the end of the day. I expect that if the pair closes firmly above 1.1053 it would signal a bullish continuation. A daily close below 1.1033 might suggest the downtrend has resumed.

Bottom Line

• EUR/USD is at an inflection point ahead of the US jobs report which tends to accompany volatility.
• Today’s closing price should clarify the trend in the currency pair after some conflicting signals throughout the week.