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EURUSD: pair poised to drop from the upper line of the channel


The majors showed mixed dynamics against the greenback last week. The Aussie shed 1.50%, while the Kiwi, loonie, and pound lost 0.31%, 0.27%, and 0.15% respectively. Posting an increase against the US dollar were the Swiss franc (+0.93%), the yen (+0.68%), and the euro (+0.66%).

Volatility was high in Friday’s US session following the release of the Nonfarm Payrolls report. The dollar slumped after the release as the number of jobs created missed expectations, along with average hourly earnings.

The US economy created 155k new jobs outside the agricultural sector in November against a forecast of 198k. The reading for October was revised from 250k to 237k, while September’s was revised from 118k to 119k. The unemployment rate remained unchanged from October’s at 3.7%, while average hourly earnings rose by 3.1% year-on-year (+0.2% MoM).

The euro jumped to 1.1409, but was subsequently pushed back to close at 1.1391.

Day’s news (GMT+3):

  • 10:00 Germany: trade balance (Oct).
  • 12:30 Eurozone: Sentix investor confidence (Dec).
  • 12:30 UK: GDP (Oct), industrial production (Oct), manufacturing production (Oct).
  • 16:15 Canada: housing starts (Nov).
  • 16:30 Canada: building permits (Oct).
  • 17:00 UK: NIESR GDP estimate (Nov).
  • 18:00 US: JOLTS job openings (Oct).

Fig 1. MA channel on the EURUSD hourly chart.

Current situation:

The EURUSD pair was trading sideways before the NFP report was released. The pair had dropped to 1.1360. When the report was released, it jumped to 1.1416.

In Monday’s Asian session, this growth continued to reach 1.1436. The pair is now trading around the upper boundary of the upwards channel at the 67th degree. Considering that today is Monday and the US dollar fell against all the majors on Friday, I expect to see a correction to the trend line at 1.1405 in the second half of today’s trading.

An ending diagonal is forming at the upper line of the channel. This is a precursor to a sharp drop on the pair. If my expectations are proven correct and the drop at the beginning of the European session is faster than anticipated, we can take the 45th degree as a target.

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