The EUR/USD pair rose during the Friday session in reaction to the weaker than expected Non-Farm Payroll report out of America. The report was expected to show a build of 200,000 jobs last month, but fell short as it only showed that 120,000 we added. With this in mine, many traders will have thought that the Federal Reserve isn’t that far from more quantitative easing. However, this report is simply one out of several that have shown a uptrend in employment, and as a result it could be an anomaly. The pair has fallen far too much over the week to think that the trend will suddenly shoot straight up.
The 1.31 level held back the bulls for the session, and bounce wasn’t exactly impressive. The fact that the 1.31 level – a minor one, held is telling as well. This is possibly because of dovish comments out of Mario Draghi this week as the ECB held a press conference. The weak economy in Europe and the widening of bond spreads will certainly continue to punish the Euro overall.
The 1.30 level below is massive support, so a bounce wasn’t too unexpected. The level will more than likely give way eventually though, especially with the massive bearishness in this pair overall. The European Union has far too many problems to expect that the world will want to pile into the Euro going forward. Also, the US Treasury market is considered to be one of the safest, and of course you need to have US dollars in order to buy them – so this will create a “flight to safety” type of trade. With this in mind, we think that the rallies in this pair will more than likely only offer selling opportunities in the future. In fact, we don’t trust the buying of this pair until we get through the 1.35 level – an area that is quite far from here.
The selling of rallies that show weakness and selling of a breakdown below the 1.30 level is what we are looking to do in this pair. We will not buy until the 1.35 level is well below us on a daily close.
Written by FX Empire