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The euro currency bounced back above the 1.2000 level against the US dollar last Friday, after the United States Non-farm jobs report for the month of January disappointed market participants. Prior to the rebound, the EURUSD pair had been coming under pressure, and found support just above the 1.1950 level.
Following a string of solid daily gains, the greenback took a hit as the details inside last Friday’s job report painted a bleak picture of the US job situation. Wage inflation was seen growing less than expected, and the US labour participation rate dropping due to ongoing effects of the COVID-19 pandemic.
The negative revisions to previous months headline numbers also hurt market sentiment towards the buck. The November headline number was revised down by 72,000 to 264,000, while the December change was revised down by 87,000 to a monthly loss of -227,000 jobs.
President Biden also took the opportunity to state that his $1.9 trillion package was greatly needed to help the US economy after the weak jobs report. With the softer jobs picture, and lack of wage inflation caused traders and investors to bet the US economic recovery was less mature than expected and sell the US dollar.
This leaves the EURUSD pair in a difficult spot this week. With the lack of follow through below the 1.2000 level, and subsequent reversal and weekly close above the pair’s 20-day moving average, the recent breakout in the pair appears less impressive.
From a technical spot the bearish case only looks strong while the EURUSD pair trades below the 1.2060 resistance level. This is going to be a big technical spot to watch this week, and it will be probably providing the clear technical hint about the way forward for the EURUSD.
Additionally, the trading action in the US dollar index is going to play a huge role determining what the EURUSD pair does this week. I believe that bulls must hold the index above the 91.25 level this week to have any shot of getting the recent up move back-on-track.
Moves in the United States bond market are also going to provide a huge clue about what the market really thinks about the greenback at the moment. The United States CPI inflation release on Wednesday is likely to set the trend for week in regard to EURUSD positioning.
EURUSD Short-Term Technical Analysis
According to the four-hour time frame the head and shoulders pattern that was triggered last week remain the central theme for short-term traders. The major battle this week is going to take place around the neckline of the pattern, around the 1.2060 level.
The big risk is that bulls take the price above the 1.2060 and rally the EURUSD pair towards the 1.2100 level once again. Sustained strength above the 1.2060 level and I would expect an attack towards the 1.2130 level is possible, and maybe even an attack towards 1.2200.
To the downside, failure around the 1.2060 level is likely to result in another stab at the 1.2000 level. Failure under the 1.2000 area and I would expect to see sellers taking back control and trying to bring the EURUSD to fresh yearly lows.
Source By ActivTrader.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart, the main theme is the large rising price channel that has basically been in play since November last year. Last week the EURUSD broke under the channel, but quickly recovered back inside the channel.
I will expect the bottom the channel to get tested again if bears fail to reclaim the 1.2060 level this week. Should we see the bottom of the channel holding, then I would expect the EURUSD to rally much higher over the coming weeks.
Just to let you know, the top of the channel is located around the 1.2700 level, meaning it could be a great risk-reward trade if the EURUSD pair holds above the channel this week.
Source By ActivTrader.
