EUR/USD Forecast: bearish flag formation on short-term charts, NFP in focus
|In a knee-jerk reaction to the leaked details of the long-awaited Trump’s tax plan, the US Dollar weakened sharply and lifted the EUR/USD pair to one-week high on Thursday. The pair, however, failed just ahead of the 1.1700 handle, marking the 100-day SMA hurdle, and had a rather muted reaction to Trump's nomination of the current Fed Governor Jerome Powell to be the next Fed chair, in line with what market participants had been expecting.
Focus now shifts to one of the keenly watched economic indicators from the US, monthly jobs report, popularly known as NFP. Following September's hurricanes impacted report, the headline number is anticipated to rebound sharply and show that the economy added over 300K new jobs in October. Heading into the key event risk, repositioning trade would be a key determinant of the pair's momentum amid a data-empty European economic docket.
From a technical perspective, the pair's gradual recovery within a short-term ascending trend-channel, from over 3-month lows touched in the aftermath of a dovish ECB taper decision, now seems to constitute towards formation of a bearish continuation flag chart pattern. Hence, a decisive break below the ascending channel support, currently near the 1.1630-25 region, would reinforce the bearish bias. A follow-through selling pressure below the 1.1600 handle would pave way for extension of the pair's downward trajectory towards the key 1.1500 psychological mark with some intermediate support near the 1.1560-55 area.
On the upside, any recovery attempts might continue to confront fresh supply near the 1.1700 handle and only a convincing break through the mentioned hurdle might now negate the near-term bearish outlook.
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