Forex Technical Update
NFP and the 1.4150-1.42 Zone
- Tuesday and Wednesday's broken lows near 1.4150 to 1.4175 were being tested ahead of the NFP release. This is near the 38.2% retracement level seen int he 1H chart.
- The forecast for 89K to 91K after a dismal 18K is not that aggressive. Coming out at 119K, with unemployment edging down to 9.1%, the market reacted with risk appetite, and is attempting to push up the EUR/USD.
- This is better than expected, but not really that great, (200K+ would have been a very pleasant surprise).
- Nonetheless, the initial reaction was bullish, but defense at the 1.42 line is strong, and the market is held near 1.4175.
- Let's see who wins within this zone.
Can Bulls Push Above 1.4250?
- With a break above 1.42, the EUR/USD rally can still be seen as a correction, but is likely to head to 1.4250. But with a break and hold above 1.4250, 61.8% retracement, it is likely that the market has returned to the bullish mode in the short-term within the medium term context of a ranging action.
- The bullish scenario in this short-term outlook targets 1.4370. A break above this level changes the bearish tilt of the recent consolidation ( in a declining wedge), and reflects a more sideways to slightly bullish market.
- The next target in this consolidation/bullish mode would be 1.4450.
Can Bears Hold Below 1.42? Push Below 1.4050/1.40?
- The bullish outlook is less likely if the market can hold below 1.42 to end the week, or to start the next.
- The bearish outlook is more likely is the market can then push back below 1.4050 low. Anything above is still vulnerable to being a bear trap.
- First, we target, 1.40 and 1.39. Then if the market holds below 1.40 in subsequent bullish attempts, a slide to 1.3837 low - 1.3850 is a short-term target.
- A break below 1.3850 opens up 1.3660-1.3670 (around the 61.8% retracement seen in the daily chart).
- The 1.37 level could be a conservative target, being near the projected wedge support in the daily chart.
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Fan Yang CMT
Chief Technical Strategist