Strong US Data Drives EURUSD to Test 4Month Low at 110
Matt Weller, CFA, CMT February 5, 2020 1:15 PM
EUR/USD is hinting at further downside potential if 1.1000 support is breached...
Many traders are still on edge about the spread of coronavirus, but today’s stellar US data has alleviated at least some of those concerns.
In the strongest print in nearly a half decade, the ADP Employment report showed that the US economy added 291k jobs last month. For an indicator that appeared to be settling near “full employment” levels between 100k and 200k jobs per month, the back-to-back 200k+ prints suggests that the labor market remains robust.
Separately, the ISM Services PMI survey came in above expectations at 55.5, boosted by improvements in business activity, new orders and imports. That said, the slight deterioration in the employment component of the report took some of the shine of the strong ADP print (tune in tomorrow for our preview of what these reports mean for Friday’s marquee Non-Farm Payrolls release).
Not surprisingly, the perception that the US economy is chugging along despite coronavirus disruptions overseas has boosted the greenback, the day’s strongest major currency along with the Australian dollar. Looking at the world’s most widely-traded currency pair, EUR/USD has fallen to test a critical support level near 1.10. This level (technically 1.0992) marks the pair’s lowest closing price over the last four months and has served as support on four distinct occasions over that period:
Source: TradingView, GAIN Capital.
For those tracking at home, we’re still monitoring EUR/USD’s turn-of-the-year head-and-shoulders top pattern at the top of its bearish channel. The pattern projects a “measured move” projection down near 1.0930, hinting at further downside potential if 1.1000 support is breached. Below that level, bears may look to target the lowest close in nearly three years around 1.0900. Even if we see another bounce off these levels, traders may opt to sell the rally in-line with the longer-term downtrend as long as rates remain below Monday’s peak near 1.1100.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.