Earlier today, the U.S. Department of Labor reported that the economy created 228,000 in November, beating expectations for an increase of 200,000 jobs. As a result, the euro declined against the greenback and reached late November lows. Will we see further deterioration in the coming week?
On Monday, we wrote the following:
(…) In our opinion, if EUR/USD drops under the lower border of the blue rising trend channel, the first downside target will be around 1.1732, where the November 22 low is.
From today’s point of view, we see that the situation developed in line with the above scenario and EUR/USD moved lower once again earlier today, slipping to our first downside target. Although this area triggered a rebound, the lack of the buy signals generated by the daily indicators (and the sell signals generated by the long-term indicators) suggests that another downswing is just around the corner.
If this is the case and the exchange rate breaks under the above-mentioned support area, the next target will be around 1.1660, where the size of the downward move will correspond to the height of the blue rising trend channel.
Looking at the daily chart, we see that the lower border of the purple rising trend channel encouraged currency bulls to act and triggered a rebound in recent days. Thanks to this week’s move USD/JPY increased above the red declining resistance line (based on the March and July peaks), which is a positive sign. Nevertheless, in our opinion, it will be more reliable if we see a daily closure above this resistance line.
If currency bulls manage to do such action, the exchange rate will likely test the upper border of the purple rising trend channel, the yellow resistance zone and the orange declining resistance line seen on the weekly chart. However, taking into account the current position of the indicators, we think that further rally is not likely to be seen and we’ll see a reversal in this area in the coming week.
From the medium -term perspective, we see that the lower border of the blue consoidation stopper further declines and triggered a rebound in recent days.
How did this increase affect the very short-term picture? Let’s check, examining the daily chart.
Looking at the above chart, we see that USD/CAD invalidated the small breakdown under the green support zone, which encouraged currency bulls to act and resulted in a very short-term upward move. As a result, the pair approached the orange resistance zone, which triggered a pullback earlier today.
Nevertheless, taking into account the fact that the buy signals generated by the daily indicators remain in cards, we think that we’ll see one more upswing and a test of the previously-broken lower border of the purple rising trend channel in the coming days.
Naturally, the above could change in the coming days and we’ll keep our subscribers informed, but that’s what appears likely based on the data that we have right now. If you enjoyed reading our analysis, we encourage you to subscribe to our daily Forex Trading Alerts.
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts