EUR/USD: expected movement against US session

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On Friday, trading on the euro after the NFP release ended in the green. The American dollar fell under pressure as traders focused their attention not on the jobs growth in January, but on the revised figures for November and December, which were reduced by 41,000, as well as a growth in unemployment to 4.8% and a lower than expected growth in average hourly earnings of 0.1% (0.3% had been forecasted). The ISM Business Activity Index for the service sector fell from 56.6 to 56.5, where a rise to 57.0 had been forecasted.

The US economy added 227,000 jobs in January, much higher than December’s 157,000 and January’s forecast of 175-180,000. The EUR/USD rate closed around 1.0784 after a low of 1.0709 (a growth of 75 points).

Market expectations:

Today is Monday; rebound day. Given that from a low of 1.0709, the rate ricocheted up to 1.0797, I’m expecting the market today to move counter to the US session. A weakening euro may not be on the cards, given that throughout Friday we should have seen one-way traffic. What we saw instead was the formation of a daily candle with a small bullish body and a long lower shadow. Over the past two days, a range of 1.0709 to 1.0829 has formed. The EUR/USD pair will continue to move in whichever direction it opens. Today I’m expecting around 1.0744.

Day’s news (GMT+3):

• 10:00 Germany: factory orders (Dec);
• 12:10 Eurozone: business activity index for retail (Jan);
• 12:30 Eurozone: Sentix investor confidence (Feb);
• 17:00 Eurozone: ECB head Draghi’s speech;
• 18:00 USA: Labor Market Conditions Index (Jan);

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.0744, high: 1.0802, close: 1.0759.

For Friday I forecasted 1.0699 without taking payrolls into account. The minimum turned out 10 points higher (1.0709) and restored from there to 1.0797.

The pair consolidated under the 67^th degree for 13 hours. For Monday I’m expecting a weakening of the single currency against the US dollar to 1.0744, i.e. movement counter to the American session. I believe that the rate will rise to around 1.0800 before falling.

Let’s take a look at US bond yields. In Asia, US 10-year and 30-year bonds fell by over 1%, putting pressure on the dollar. If this fall continues in the European session, the euro will strengthen. For the euro to weaken, US bond yields must rise. I’m not taking the day’s news into account here.