EURUSD The Euro on defense mode after sharp losses
The single European currency is trying to stabilize and limit further losses.
The US currency appears to be building an upward momentum after a surprising Friday where one of the most important macroeconomic data that often move strongly the markets was announced extremely in favor of the US currency pleasantly surprising those who were positioned in favor of the dollar.
US non-farm payrolls were reported up 571,000, well above average estimates of 180,000 to 200,000, having now changed the data on a possible shift in Fed’s rhetoric. This possibility was captured relatively quickly as US bond yields moved higher, creating a positive environment for the US currency.
Let’s not forget, of course, that the first signs that the strong upward movement of the euro had been called into question appeared from Thursday when in the wake of the announcements on the increase in interest rates by the ECB and the statements of President Lagarde, the European currency began to retreat significantly from the high levels to which he had climbed.
The development and behavior of the market has completely confirmed my thinking as already from last week I had mentioned that the possibility that the temporary bullish momentum of the single European currency is near the end is highly increased.
As all the previous data had especially support the European currency the market had discounted relatively all the elements in favor of the euro and was highly susceptible to anything that would change this balance, something which what happened.
Now the possibility that the single European currency will suffer further losses is increased, but without these taking on dramatic proportions.
As the past has shown several times after news that has surprises about the new jobs in United States there are movements in the forex market that widen up to 300 points,which could theoretically leed the pair close to the 1,06 levels.
In any case however as the pair has already corrected almost 250 basis points from the highs of 1,1030 I would maintain more conservative thinking and liquidate some of the gains from the recent positions in favor of the US currency.
Today’s agenda is without announcements from the American continent. The only important news are EU Retail sales and investor confidence index and later in the afternoon a speech by President Lagarde. Without major surprises the pair may be limited to a narrow trading range, avoiding the euro further significant losses.