EUR/USD analysis: Italian referendum and ECB take center stage

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0663

Friday started with a soft tone, with the American dollar and equities reversing their previous gains as investors entered cautious mode ahead of the US NFP report. The jobs report for November was quite mixes, as the economy created 178,000 new jobs in the month, beating market's expectations, while the unemployment rate fell from 4.9% to 4.6%, but was due to a fall in the labor participation rate, to 62.7% from 62.8%. The major disappointed was a decline in average hourly earnings, which fell by 0.1% against expectations of a 0.2% increase. The dollar fell with the news, although with uneven results against the G-10 bloc. The EUR/USD pair jumped at 1.0680, below its weekly high set at 1.0689, but quickly retreated to close the week barely 60 pips higher.

This upcoming week, market's attention will be focused in Europe, with the Italian referendum on constitutional reforms going on this Sunday, and the ECB's economic policy meeting next Thursday. The Central Bank is largely expected to extend its QE program by at least six months, to September 2017, but to keep its monthly purchases unchanged at EUR80bn.

From a technical point of view, and despite the pair has closed in the green for two consecutive weeks, it's still too early to call for an interim bottom at 1.0571, the low of the year achieved last November, as the recovery has faltered below the 23.6% retracement of its latest daily slide at 1.0700. The market is probably waiting for the ECB, and the FED, next December 14th, before defining some clearer positions in the pair. Daily basis, technical indicators have managed to correct extreme oversold conditions, but lost upward strength within bearish territory, while the price is currently struggling with a bearish 20 DMA, indicating limited buying interest. In the 4 hours chart the price is above a modestly bullish 20 SMA and around a strongly bearish 100 SMA, while technical indicators head slightly higher above their mid-lines, but with no certain momentum. An upward acceleration beyond 1.0700, can favor additional gains up to 1.0815, the 38.2% retracement of the same daily slide, while below 1.0600 the pair may fall further to fresh year low.

Support levels: 1.0625 1.0590 1.0550

Resistance levels: 1.0700 1.0745 1.0790

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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