The euro is still looking more against the US dollar due to weaking jobs data and the miss on the headline number from analysts’ expectations. Wage data however remained strong, leaving the US dollar mixed to marginally lower.
Breaking down the data, the non-farm payrolls for June came in at 209,000 versus a 225,000 estimate. Additionally, May and April NFPs saw a big downward revision, suggesting a cooldown in the job market.
On Wednesday, the US will publish June CPI which will be the next big market mover for the US dollar. A serious drop in CPI could help boost the EURUSD pair.
Germany will also release the final estimates of the Harmonized Index of Consumer Prices (HICP) for June, previously estimated at 6.8%. The diversion in inflation in the USD and Europe could help bump the EURUSD higher.
I would expect that the pair could eventually headed down towards 1.1000 level and then possibly 1.1500 later in the year if we see sustained inflation in the eurozone.
The ActivTrader Sentiment tool suggests that 69% of traders are bullish on the EURUSD. This is still very bad if we consider that traders are still that bullish despite the ongoing price fall.
As traders, we typically look to fade retail sentiment when it is overly skewed in one direction. This style of trading, fading sentiment, has been one of the most effective and used tactics of hedge funds.
The EURUSD is currently showing a bullish technical development as it continues to hold above the Ichimoku Cloud. The price has remained above the cloud since Friday.
This above chart also shows clearly the price needs to hold above the 1.0900 and 1.0880 area to keep the short-term price trend for the EURUSD bullish.
According to the daily time frame, the pair will form an important lower high and double bottom price pattern if we see a major price hold above the 1.0650 support region.
As long as the pair trades above the 200-day moving average and Ichimoku cloud, and the 1.0850 level, we are likely to see a pending rebound towards the 1.1050 area.