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After a swift run lower in June, EUR/USD was in consolidation mode last week. With top tier economic data from the U.S. coming soon, is this a setup for another momentum move?

Short Fib Setup On EUR/USD?

EUR/USD 4-Hour Forex Chart
EUR/USD 4-Hour Forex Chart

Two weeks ago, we checked out a longer-term opportunity in EUR/USD to short on the potential of the Fed to hint at tapering pandemic stimulus measures. It looks like that’s playing out nicely so far after the Fed hinted at moving interest rate hikes forward  to 2023, but that moved stalled quite a bit last week.

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This week, we’re checking out EUR/USD for a potential shorter-term swing play as we may get a new burst of volatility right before the weekend. Pip Diddy pointed out in his weekly outlook post that we will get the latest U.S. employment update on Friday, which should be a market mover as it will likely influence traders’ conviction levels of a monetary policy change from the Federal Reserve.

For the very short-term players, last week’s consolidation range between roughly 1.1910 – 1.1970 could be a setup for a “news breakout play,” where if the U.S. jobs number disappoints, as it has been over the last two reports, this could be a bearish catalyst for USD / bullish reaction in EUR/USD. And vice versa, if the number goes above expectations (around +700K net job adds), then it could to a downside break and momentum move favoring EUR/USD bears.

For the swing type traders, there’s a Fib setup in the works on EUR/USD, and if the pair does move higher and the U.S. jobs number isn’t enough to break the major psychological around 1.2000 and the 61% Fibonacci retracement level, then that could draw sellers in for a momentum move lower from there. Remember that we have policy divergence between the ECB and Fed (ECB is more likely to wait longer to reduce pandemic monetary policies) that both swing and longer-term players are likely basing their biases on.

We’ll have to wait-and-see what this week’s ADP non-farm employment numbers and PMI employment data are before getting a strong conviction on the direction, but for now, there are plenty of opportunities to watch closely on EUR/USD to get ready for.

What do you guys think? Will this week’s U.S. employment update break EUR/USD out of its funk? Is this another setup for the sellers to make another run lower? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.