Expected Fall of Euro to 1.1370 Before Payrolls

Yesterday’s Trading:

The USD fell on Thursday against the main currencies. In my last review I wrote that traders are correcting their positions before today’s USD employment report for April.

Despite the increase in initial applications for unemployment benefits, the euro dollar had fallen to 1.1385 by trade close in Europe. Initial unemployment benefit requests were up to 274k for the week against a forecasted 260k.

Neither the ADP’s index, not the initial unemployment benefit applications can help us forecast the Non-Farm Payrolls. This is why many traders are taking a break off the market until after the NFP. However, there are some traders who are specially waiting for the first Friday of the month in order to catch the wave at 15:30 EET.

Market Expectations:

The euro/dollar has stopped by the trend line. The pair has been consolidating in a narrow range at 1.1400 just as yesterday. My forecast is for up to 15:30 EET. There’s not much point making a forecast for the payrolls.

I always consider a sideways or a bounce on payrolls day. Today I expect to see Europe open with the euro down to 1.1370. The thing is that the Aussie currency weakened against its US counterpart after the publication of a report on monetary policy from the RBA. I reckon that the euro will weaken against the USD due to the AUD/USD pair.

Day’s News (EET):

• 15:30, Canadian and US labour market data (job creation, average hourly wage, employment in the non-agricultural sector and the unemployment level);

• 17:00, Canadian index for business activity from Ivey;

• 18:00, BoC deputy governor Lawrence Schembri to speak;

• 20:05, number of drilling rigs from Baker Hughes.

Technical Analysis:

On Thursday the euro/dollar fell to the trend line and the D3. Together they formed a strong support, but a narrow price range indicates a further fall for the pair. The zone between 112 and 135 degrees is inverted, but today at 15:30 EET the US labour market reports are out. After the reports are out, the price will stray +100 points (4 digits after the decimal point) for several minutes.

Today it’s good to look at the limits of the price fluctuations. If the NFP is lower than forecasted and the data for two months is reassessed down, the euro/dollar will return to 1.1520. If it’s higher than 200k, we’re heading below to 1.1300-1.1320.