After weeks of boring ranges, the EUR/USD broke higher like a vengeance, adding pretty much 330 pips in two days. The movement was a result of a dollar's sell-off, triggered by poor US data and FED's Dudley comments, all of which suggested the slowdown in the macro scenario will force the US Federal Reserve to remain on hold for longer than expected.
Last December, the FED sort of anticipated 4 possible rate hikes for this 2016, but all of a sudden, market has moved hopes for a rate hike towards February 2017. The dollar plummeted across the board, and the EUR/USD traded pass the 1.1200 level.
But then US Nonfarm Payrolls came, and showed that, despite jobs' creation was just of 151,000 new jobs, against expectations of 192K, wages surged strongly, and the unemployment rate fell to its lowest in eight years, down to 4.9%. The dollar initially fell, but turned then higher across the board, boosted by speculation that a higher wages will help to boost inflation, the biggest issue for a rate hike case.
View the Live chart of the EUR/USD
I do also believe that this Friday's dollar recovery may also have to do with some profit taking ahead of the weekend, and that a dollar recovery is far from being confirmed. Next week, the attention will center in Janet Yellen's testimony before the Congress. Should she offer a less dovish tone, then the greenback will have higher chances of recovering.
Technically, the weekly chart shows that the price has finally advanced beyond its 20 SMA, while the technical indicators present a tepid upward momentum, crossing their mid-lines towards the upside. Daily basis, the technical indicators are retreating from overbought levels, but the price has accelerated strongly up, leaving behind the 100 and 200 DMAs.
Now struggling around the 1.1120 level, a weekly close below it can lead to a steeper decline towards 1.1030, the 200 DMA. Further slides below 1.1000 will but the pair under pressure, targeting then the 1.0800 region for the end of next week. A weekly close above 1.1160 on the other hand, will keep the bullish trend alive, with the next resistances at 1.1250, and the 1.1340 area for the next week.
Latest updates on the EUR/USD Forecast
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