special reports

A Drop In Non-Farm Payrolls Conflicts With Bearish EUR/USD Technical Outlook

Friday, 07 November 2008 05:41:44 GMT  |  John Rivera, Currency Analyst

The upcoming NFP report is expected to show the economy gave back 200,000 jobs as employers contending with a recession and a frozen credit market were forced to cut costs.

Fundamental Outlook

The upcoming NFP report is expected to show the economy gave back 200,000 jobs as employers contending with a recession and a frozen credit market were forced to cut costs. The dismal labor report will only add to the mounting evidence that the U.S. economy is headed for a prolonged recession with both the service and manufacturing industries falling into deep contraction. Historically the employment indicator has been a market mover and a job loss of this magnitude traditionally weighs on the dollar. However, the technical outlook for the EUR/USD is calling for a decline below 1.2327. Although, the job report may generate initial dollar bearish price action, the relative fundamental outlook between the U.S. and Europe may ultimately lead to further EURUSD weakness. Therefore, the NFP report may generate an opportunity to go short the pair if there is a move higher.

 

                                                                                                                                    

Technical Outlook

The EURUSD remains in a range, which will probably tighten for the rest of the week.  A break from the range (triangle) is expected next week.  To repeat yesterday’s analysis, which remains valid; “the nature of price action since last week’s low strongly suggests that a triangle is unfolding as a 4th wave within a 5 wave decline from 1.6040. Very short term, slightly lower prices in wave d of the triangle would be followed by an e wave that completes the triangle.  If the triangle interpretation is correct then price will remain below 1.3302 and drop to a new low (below 1.2327), perhaps as early as early next week.  I will look to identify completion of the triangle going forward in order to position for the drop below 1.2327.  Until then, the EURUSD is a range trading candidate.”  The mentioned wave d could be complete although additional weakness towards 1.2600 is possible short term before the expected wave e bounce. 

 

For More Technical Analysis Visit the Daily Technical Report

 

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com

 

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars