Following the results of yesterday's trading, the main currency pair of the Forex market, in the truest sense of the word, collapsed. Thus, the assumption that the US dollar has ended its downward cycle and moved to a large-scale strengthening across a wide range of markets is confirmed. If we look specifically at the EUR/USD currency pair (which is exactly what we are currently doing), it becomes obvious that the prospects for the US economy and the timing of its recovery from the crisis caused by the COVID-19 pandemic are more favorable than in the zone where the single European currency moves. In all honesty, today's employment reports in the United States should confirm (or refute) such an opinion. Let's take a closer look at today's labor market data and the expectations associated with the upcoming reports.
So, today, at 14:30 London time, the US Department of Employment will provide data on the labor market for the first month of this year. As a rule, bidders pay the closest attention to three indicators. This is a change in the number of people employed in non-agricultural sectors of the economy, where the forecast is very modest. As economists expect, in January, only 50 thousand new jobs were created in the world's leading economy. Naturally, such a small figure is a consequence of the serious coronavirus epidemic in the United States. Another important indicator is unemployment, which is projected in January at the same level as it was previously 6.7%, that is, no changes are expected here.
As noted in many previous articles, investors are paying close attention to the growth of average hourly wages, as this indicator affects the level of inflationary pressure in the United States. And inflation in the US, as you know, has long been a headache for the Federal Reserve System (Fed). According to analysts' expectations, in January of this year, wages will grow by 0.3%. Given that the previous figure was 0.8%, this is a very acceptable figure. In general, the forecasts for today's labor reports are by no means overstated, rather the opposite. The greater the chance that the releases will come out not worse, but rather better than expected, which will further strengthen the US dollar against all major competitors.
Daily
Yesterday's fall ended for the euro/dollar at 1.1963. The daily chart clearly shows that after the breakdown of the strong support zone 1.2060-1.2050, which held the quote for a long time, the pressure on the pair increased significantly, which is not surprising. Most often, this is exactly what happens in the market. As a result of yesterday's fall, the EUR/USD pair broke through the black 89 exponential moving average and closed trading not only below the most important psychological level of 1.2000 but also under the 50th level of the Fibonacci grid, stretched for growth of 1.1601-1.2349. Thus, at the moment, we get another confirmation that the trend for the main currency pair has changed from bullish to bearish with a high degree of probability. According to the classics of technical analysis, the passage of the 50th level of the Fibo from a particular movement indicates that this is no longer a correction, but a change in the trend. Today's trading is still extremely important because the pair is balancing near the lower border of the daily cloud, risking falling out of it.
If this happens, we will get another confirmation that the trend for EUR/USD has changed to bearish, and therefore, we need to prepare for sales. Today I do not recommend opening new positions on EUR/USD, and I will explain why. First, during the current weekly trading, the pair has already sunk significantly, and on the last trading day, against the background of profit-taking, there may be some rate adjustment, which is better to skip, since purchases against the current and very strong bearish trend are too risky and very dangerous for the deposit. Secondly, the data on the labor market is always increased volatility, nervousness, as well as any possible surprises. Do you need it? I believe that it is better to observe everything that comes while sitting "on the fence", and on Monday, taking into account the closing of today's and weekly trading, analyze and build further trading plans during the week. For those who still definitely want to trade today, I recommend considering sales after a short-term rise in the price area of 1.2000-1.2020.
