Big day ahead for the U.S. dollar with the monthly U.S. employment update right around the corner, and we’ve got textbook technical setups on EUR/USD to play any short-term moves on the Greenback that will likely occur.
Intermarket Snapshot
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Fresh Market Headlines & Economic Data:
- China and US agree to meet in October for trade negotiations
- Fed’s Evans says limits on trade, immigration could slow U.S. growth
- U.S.-based employers ramped up the pace of downsizing in August to cut 53,480 jobs, up 37.7% from July’s total of 38,845
- U.S. companies add most jobs in four months, ADP data show
- IHS Markit US Services PMI: Slowest increase in new business since March 2016
- August 2019 Non-Manufacturing ISM 56.4 vs. 53.7 in July
- UK MPs back bill to block no-deal Brexit
- German factory orders sink, raising risk of recession
- Swiss GDP increased by only 0.3% quarter on quarter in 2Q19, down from 0.4% in the first quarter
- Australia trade surplus declines to $7.29b in July
- New Zealand total building volume fell -1.5% (SA) in the June quarter, following a 5.7% rise in the March quarter
Upcoming Potential Catalysts on the Forex Calendar:
- Australia construction index at 11:30 pm GMT
- Japan average earnings & household spending at 12:30 am GMT (Sept. 6)
- Japan Leading indicators at 6:00 am GMT (Sept. 6)
- German Industrial production at 7:00 am GMT (Sept. 6)
- U.K. House prices at 8:30 am GMT (Sept. 6)
- Euro area Employment change & GDP at 10:00 am GMT (Sept. 6)
- Canada & U.S. employment at 1:30 pm GMT (Sept. 6)
- Canada Ivey PMI at 3:00 pm GMT (Sept. 6)
What to Watch: EUR/USD
It’s that time again where will get the ever influential U.S. government’s monthly report on employment conditions. This tends to be a big short-term market mover as any surprises tend to influence traders’ opinion of how the Fed may shift their economic outlook. But keep in mind that those moves aren’t always in one direction and often times, the reaction may contradict the actual data depending on expectations. (i.e., “buy-the-rumor, sell-the-news” scenarios). And according to my main man Forex Gump, expectations are to see that August conditions were roughly the same as July, with a slight lean towards weaker data given weakness in both the manufacturing and services sector according to the latest ISM surveys.
So, with big events like this, you’ll wanna stick to the most liquid markets to trade to avoid major slippage and/or gaps, which brings us to the EUR/USD pair, probably the most liquid currency pair in the world. And one the one hour chart, we can see the market stalling at a previous consolidation area (1.1050 – 1.1100) after bouncing higher over the last two sessions.
If you’re a bear on EUR/USD, you have the longer-term downtrend in your favor, and this could be an opportunity to short at a better price. The odds are good at the moment that technical sellers may be looking to jump in with this retest of not only a previous area of interest, but also a Fibonacci retracement with an overbought stochastic signal. But the fundies aren’t currently in your favor, so it’s probably a good idea to stay on the sidelines until the U.S. jobs data, or if you are aggressive, nibbler plays and scale in strategies are an option as well. If the jobs data is good and the Greenback rallies, this is a setup for a good potential return-on-risk if using the daily ATR (50 – 60 pips) as a stop guide and previous swing lows (over 100 pips away) as a target.
If you’re a bull on EUR/USD, you’ve got the fundies in your favor, but the technicals are against you at the moment. If the U.S. data disappoints and USD falls in reaction to the data, then a good move would be to look for a break-and-retest above the broken previous support area around 1.1100. If that holds then a short-term long position is a viable idea to play the recent weakness in the Greenback, which was first sparked earlier this weak by the disappointing ISM manufacturing survey data.