EUR/USD Extends Recovery Rally

The dollar continues to lose ground against a basket of currencies ahead of Friday’s nonfarm payrolls report, while the euro is gaining ground following a report from Reuters, citing senior sources with direct knowledge of discussions, the European Central Bank will extend its bond purchases beyond next March and consider sending a formal signal after its policy meeting next Thursday that the program will eventually end. As a result of the developments, EUR/USD is currently trading at the 1.0655 level, up 0.66% over Wednesday’s North American close.

Still intact, however, is first resistance at the Monday’s intraday high at 1.06855, which represents a failed test of the November 22nd intraday high at 1.0660. Clearing this level of resistance would leave the next target at the 38.2% retracement of the November decline at the 1.07565 level.

Volatility has the potential to pick up in tomorrow’s trading, however, given the release of the US November jobs report. A stronger than expected number could work to boost the dollar once again, thereby resulting in another downdraft in EUR/USD.

Consensus estimates are calling for an increase of 180K jobs to be reported, compared to an increase of 161,000 posted last month. The unemployment rate is expected to remain unchanged at 4.9%. The strong ADP report released yesterday sets a positive tone for the BLS report tomorrow.

Failure to clear first resistance would keep the current consolidation phase intact and leave EUR/USD at risk for another drop to key support at the low established in last week’s trading at 1.05183, which represents a test of key support at the December 2015 corrective bottom at 1.05237 as well as the major corrective bottom established in March 2015 at the 1.04590 level. A drop below the key zone of support would confirm a breakdown from a multi-month trading range, calling for further losses in EUR/USD on a longer term basis.

EUR/USD Daily/Monthly Charts


Tracy L. Morganthall, CMT, has been a Technical Market Analyst for more than 20 years. She has experience analyzing and producing reports on equities, both domestic and international markets, as well as Forex and commodities. She attended Trenton State College in Trenton, New Jersey, earning a Bachelor's in Finance.