The pair still really isn't running anywhere at the moment as price remains relatively trapped between the 100-hour MA (red line) @ 1.1607 and the 200-hour MA (blue line) @ 1.1640. There's also swing resistance that is helping to cap gains as it did yesterday around 1.1650 with bids and swing support around 1.1590-00 also to help provide additional support for the pair if it does track below the 100-hour MA.
Right now, the two key risk events in the market are the US non-farm payrolls report and the trade rhetoric. Although the latter doesn't involve the EU, it does affect trading sentiment in the dollar and that does play a part in the pair's movement.
As for payrolls data today, expect the focus to be on wages once again as that will be a key determining factor of whether or not we're seeing "good" inflation in the US - the one that actually lasts. But the thing about the US jobs report these days is that it isn't quite what it used to be and with the overriding theme of the trade rhetoric still at play, it's hard for markets to brush that entirely aside and focus trading just on the report later.
Unless the report is a truly abysmal one, I expect the dollar to stay steady even if it drops initially on the report release.
The second risk event is the more tricky one as this is very much unpredictable to say the least. We can spend all day analysing a possible Trump announcement but you can just not predict when or how it will come about. That's the risk markets are facing right now and what is continuing to underpin the yen and swissie over the last two days.
In essence, an announcement should trigger further risk off sentiment in the market and that should at least underpin the dollar against the euro. But what happens if there is no announcement ahead of the weekend?
That is why trading the trade rhetoric is tricky. What's next if that happens? Will the market still stay in fear?
With all things trade this year, the market has been quick to fade any trade-related headlines. And if there isn't an announcement to come by mid-day in US trading, I expect markets to pick up on that and possibly even rally a little bit.
But the caveat is that all it takes is one bad headline to mess it all up and that's where I see any recovery in risk sentiment as not getting too carried away. However, again this is trade and Trump-related, do you really think it is that predictable?
Anyway, regardless of all the fundamentals, technical levels will define and limit your trading risk and opportunities. Right now, price is contained in the near-term and the next trade would be to go with a break of either side of the near-term levels. But if the move is towards the upside, be wary of risk coming from the trade front.
- 1.1600-07 (bids, large expiries, 100-hour MA)
- 1.1583 (100-bar MA on H4)
- 1.1568-76 (38.2 retracement level, 200-bar MA on H4)
- 1.1550 (swing region)
- 1.1530 (weekly low, swing region)
- 1.1500 (bids, swing region)
- 1.1640 (200-hour MA)
- 1.1650-60 (swing region)
- 1.1690-00 (swing region, offers)
- 1.1705 (100-day MA)
- 1.1730-40 (swing region)