Last week I wrote about the EUR/USD nearing major resistance. The last paragraph was important to understand, in my opinion:
“Conventional wisdom would tell you after the ECB meeting (Mario Draghi hinting at more action in March) and the FOMC a little less dovish than the market expected this week, the pair would move lower from here. But sometimes in the market conventional wisdom doesn’t always pan out.”
As the market starts to think/believe that the FOMC is not going to be able to deliver multiple rate hikes as originally thought (think December expectations) the risk is that the EUR/USD starts a “retracement cycle” which in my opinion, could take us back into the high teens (1.1500+) especially if US economic data continues to disappoint.
Here is an updated chart:
The NFP this Friday is going to be an important number, especially for the USD this week. A weak reading could lead to a breakdown in the DXY, therefore a move higher in the EUR/USD. A breakout by the end of the week above 1.1060 would be a pretty bullish sign for the EUR/USD.
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I am looking to establish DXY shorts in the coming days
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