EUR/USD Mid-Session Technical Analysis for August 4, 2017

The EUR/USD is trading slightly higher shortly before the release of the U.S. Non-Farm Payrolls report. Volume and volatility are also down.

The U.S. Non-Farm Employment Change is expected to show the economy added 182K jobs in July. The Unemployment Rate is expected to fall to 4.3% from 4.4%. Average Hourly Earnings are expected to rise 0.3%, up from 0.2%.

Average hourly earnings are a good indicator of inflation. If they come in lower than expected then this will be bearish for U.S. interest rates and the U.S. Dollar because it will reduce the chances of a Fed rate hike this year.

Traders should also pay close attention to the events in Washington. The dollar weakened on Thursday in reaction to a report that the Russia investigation is intensifying. According to a report from The Wall Street Journal released minutes before the close, Special Counsel Robert Mueller impaneled a grand jury in his investigation into Russia’s involvement in the U.S. election. Support for the U.S. Dollar could continue to erode if the situation continues to worsen for the President.

Technical Analysis

The main trend is up according to the daily swing chart. There is no resistance at this time. This suggests that a chart pattern rather than a price will signal that a top has been reached. The daily chart actually shows there is plenty of room to the upside with the next major target a 50% level at 1.2166.

The best sign of a top will be a closing price reversal on either the intraday or the daily chart. In other words, the market is going to have to take out 1.1910 then close below 1.1867. This chart pattern will not mean that the trend is changing to down, but it will signal that the selling is greater than the buying at current price levels.

Forecast

We’re looking at three possibilities today. Firstly, the EUR/USD could break out over 1.1910 and never look back.

Secondly, there will be no follow-through to the upside, and the Forex pair will break into a pair of uptrending angles at 1.1778 and 1.1752. If 1.1752 fails then look out to the downside because the next major target zone is 1.1611 to 1.1540.

Thirdly, the EUR/USD will take out 1.1910, but the buying will dry up, profit-takers will take over and aggressive sellers will come into the market. They could lead to the formation of a closing price reversal top.