NFP’s and Thin Markets May Lead to Whipsaw Action
Employers in the U.S. are expected to add jobs for the second time in more than two years as payrolls are forecasted to accelerate 185K, marking the largest increase in three years. Meanwhile, the third reading for the annualized GDP report showed that the output of goods and services produced by labor and property located in the region increased 5.6% in the fourth quarter, while consumer confidence in March exceeded economists’ expectations as the gloom for job prospects taper off. Furthermore, durable goods orders in February advanced for a third month, with the reading climbing 0.5%, an indication that manufacturing will fuel the economic recovery as home sales continue to deteriorate. Indeed, paired with the recent improved outlook for U.S., an enhanced labor report could set the stage to trade the greenback as the economy recovers from the worst recession since the Great Depression, with an improved report dismissing any doubts about the sustainability of the recovery. Thus, if employment is released in line or exceeds expectations, this would validate our bearish EUR/USD technical outlook.
Charts prepared by Michael Wright
EUR/USD: Following up on my report from last week (Euro at Tests Range Ahead of U.S. Durable Goods Orders), the pair initially took out our soft targets at pivot support of 1.3428 and 1.3364 before pushing higher. Currently, the pair looks to test the upper trend line of the descending channel that has held since early December. Indeed, technical studies point further declines in the euro towards 1.3000, with gains likely to be capped around 1.35600.
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Written by Michael Wright, Daily FX Research
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