After the abysmal data from the US economy showing further weakness in the labor market, this could be a forecast to what we expect to see in the upcoming jobs report later this week. The news added more downside pressures on the dollar, as it currently erases earlier gains seen against the majors.
The 15 nation currency continued to extend its gains as it is currently targeting the 1.3774 level which is the 38.2% correction for the medium term descending channel. The rally was seen rather excessive as the pair has now entered an overbought area on the stochastic indicator on the four hour charts, yet direction indicators have yet to show signs of divergence to support a downside correction. Therefore, any downside correction witnessed will be weak to possibly 1.3590s in an attempt to gather enough bullish momentum to reach the above mentioned resistance level.
In a similar case to the euro, the royal pound is trading well within the overbought area as it reached levels above the 1.51 level recording an intraday high so far at 1.5127. But the downside pressure and the lack of bullish momentum resulted in the pair to currently trade just below the 1.5090 resistance level. In order to breach this level and target the 1.5150s level, the pair will need to decline in correction movements to shake off the excess buying orders before rebounding back to the upside as it is supported by the ADX indicator.
The fall seen in the USD/JPY pair was not strong enough as it failed to breach the 23.6% correction at 92.60 for the descending wave despite recording a low at 92.43. We see signs of divergence on technical indicators supporting the downside direction that will take it once again to retest the above mentioned support level. A successful breakout of this level will take the pair down to 92.10 as an initial target.