EUR/USD Forex Technical Analysis – US Dollar Safe-Haven Liquidation Lifting Euro

The Euro is edging higher against the U.S. Dollar late in the session on Friday in a volatile session that saw the single currency posting an early loss before rebounding after data in the U.S. showed the world’s largest economy created more jobs than expected in June.

The price action suggests the short-covering rally is being fueled by traders liquidating U.S. Dollar positions that were previously bought as protection against a possible U.S. recession.

At 19:00 GMT, the EUR/USD is trading 1.0181, up 0.0019 or +0.19%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $94.11, up $0.09 or +0.10%.

Friday’s U.S. Non-Farm Payrolls report is cementing expectations of another 75 basis-point hike at the Federal Reserve’s policy meeting later this month. But it is also easing concerns about a recession, which is helping the Euro as the dollar retreats.

Short-Term Outlook

Trader reaction to 1.0161 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over 1.0161 will indicate the presence of buyers. It may only be short-covering, but it is putting the single currency in a position to post a potentially bullish closing price reversal bottom.

This chart pattern will not change the trend but it could alleviate some of the downside pressure, encouraging further short-covering that could lead to a 2 to 3 day correction.

Bearish Scenario

A sustained move under 1.0161 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly lead to a retest of the intraday low at 1.0072.

Taking out 1.0072 will put the EUR/USD back on its path toward the December 2, 2002 main bottom at .9860.