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EUR/USD: expected drop to 45 degrees before NFP


On Thursday euro trading closed up. After a correctional movement to 1.0483, the euro rose to 1.0615 against the USD. The dollar was under pressure after the release of employment data for the private sector and a sharp fall in the yield of American bonds.

Data from the ADP was worse than expected. The yield for the ten year bonds fell from 2.455% to 2.346% and the 30 year bond yields saw a fall from 3.051% to 2.956%.

Other than the ADP report there were other stats. The indices for business activity in the US service sector exceeded market expectations and unemployment benefit applications were down. However, before today’s payrolls this was already forecasted by traders.

US stats:

  • Job creation in the private sector, December: 153k (forecasted: 170k, previous: reassessed from 216k to 215k);
  • US unemployment benefit applications fell to 235k (forecasted: 260k, previous: 263k);
  • US business activity index in the service sector: 57.2 (forecasted: 56.6, previous: 57.2);
  • US business activity index in the service sector according to Markit: 53.9 (forecasted: 53.4, previous: 53.4);

Market expectations:

The key event of the currency market for today is the US NFP. When the payrolls are out, I never do a forecast for the key pairs. Going of yesterday’s weakening of the dollar, we can assume that a weak NFP is already worked into the current price. If the NFP is within 150k then don’t expect the dollar to weaken. The pair could renew its maximum and head down to the LB.

If the NFP value corresponds to the forecasted 170k or better, we will see a downward correctional movement for the euro to around 1.0460 – 1.0487 (135 – 112 degrees). By the time the report is out, a real fall is expected to be taking place for the euro.

Day’s news (GMT+3):

  • 10:00, German November industrial orders and retail sales;
  • 11:00, Swiss December currency reserves;
  • 13:00, Eurozone November retail sales;
  • 16:00, Canadian December employment changes, balance of trade in November and December unemployment level. US December changes in average hourly wage for, changes in employment creation in the non-farm sector for, the unemployment level and November balance of trade;
  • 18:00, US manufacturing orders in November;
  • 20:15, US Chicago Fed president Evans to speak.

Technical analysis:

Euro/ rate on the hourly. Source: TradingView dollar

Intraday forecast: minimum: n/a, maximum n/a, close: n/a.

Without hitting the LB the euro again was up in the U3. As I wrote above, the dollar was under pressure after the release of a weak ADP report and a fall in the yield of US bonds.

At the moment of writing this review, the pair is trading at around the U3 line. The growth of the pair stopped at the 112th degree: a strong support. Before the NFP I expect a fall to around 1.0560/65 (45th degree and trend line).

Today’s key event is the NFP labour market report. With this report I never make forecasts.


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