Key fundamental and technical EURUSD drivers to watch in the coming days. Ideas for short term EURUSD traders. A mid-week EURUSD outlook.

Summary

EURUSD in likely flat trading range in next 24-48 hours, stuck between strong support & resistance levels.

Mildly negative near term momentum further suggests that EURUSD remains in this range unless major news surprise.

The Tuesday & Wednesday calendar events that might provide that surprise, and why they matter.

After last week’s big short-squeeze driven EURUSD rally, the pair has tested the 1.13 area for the past three days and failed to break through. So what are the likely EURUSD drivers and likely direction for the coming days?

Likely Flat Trading Range Opportunities Between: 1.101 – 1.13

In the past three trading days the pair has tested but failed to break above the 1.13 area. We’ve heavy resistance here from both the

• 100 day EMA (see daily chart below)
• 6% Fibonacci retracement level from the EURUSD high of March 2014

Thus we’ve resistance around 1.13 (red horizontal line in daily chart below), and support around 1.101 (last week’s resistance becomes support – violet horizontal line in the daily chart below).

Momentum is downward on the 1 and 4 hour charts below, as shown by price being within the lower quarter of the double Bollinger bands (the lower orange and green lines).

So the odds favor a modest downtrend in the near term and test of that 1.107 support area.

CLOCKWISE: EURUSD 1 HOUR, 4 HOUR, DAILY, WEEKLY CHARTS

KEY:10 CANDLE EMA DARK BLUE, 20 CANDLE EMA YELLOW, 50 CANDLE EMA RED, 100 CANDLE EMA LIGHT BLUE, 200 CANDLE EMA VIOLET, DOUBLE BOLLINGER BANDS NORMAL 2 STANDARD DEVIATIONS GREEN, 1 STANDARD DEVIATION ORANGE.

Source: MetaQuotes Software Corp, www.FXGlobe.com

01 May. 05 08.37.jpg

Three Events That Could Move The Pair

Tuesday

1. The US ISM non-manufacturing report is the big event for the pair. The report is important because:
   1. –It’s the latest read of the US services sector, and services are a larger part of GDP than manufacturing
   2. –Service industries provide most of the jobs, and so the jobs section of this report is a BIG leading indicator of Friday’s US jobs reports. Better than expected results here imply a strong jobs report, which would be supportive of the USD and thus negative for the EURUSD.
2. US trade balance data might have an impact on the USD, and thus the EURUSD, but only if it really misses or beats expectations by a wide margin.

Wednesday

1. The US ADP non-farms payrolls report is another big leading indicator of the likely outcome of Friday’s jobs reports.

EU data for the coming days is second-tier and thus not expected to influence the pair much, leaving the EURUSD to move mostly on the above US data and overall risk appetite.

Why These Reports Matter

As noted in yesterday’s post, the big event for the week is Friday’s US jobs reports, and so any reports like the PMI and ADP reports noted above are also important because they influence sentiment about Friday’s results, and thus they too move markets.

Looking ahead to Friday, the more the jobs reports (non-farms payrolls, unemployment rate, etc.) beat forecasts, the more expectations rise for a 2015 rate hike, and thus the stronger the USD becomes. The EURUSD would drop. If these reports miss expectations, the opposite happens, as a 2015 rate hike becomes less likely.

Conclusions

Thus there are 5 big EURUSD drivers to watch in the coming 48 hours.

• Technical Factors:
  • Solid support and resistance that should keep the pair within the 1.101 – 1.13 zone
  • Mildly negative momentum on the 1 and 4 hour EURUSD charts make a mild downtrend to test support more likely than a move up to test resistance.
• Fundamental Factors: A pair of reports that serve as key leading indicators of Friday’s big monthly jobs reports, plus US trade balance (assuming no changes in US or German bond yields).

Warning: Short term price movements are difficult to predict and often subject to unreported random flows of funds. Use risk management tools to minimize risk of loss.