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  • The pennant breakdown seen in the EUR/USD chart indicates a resumption of the downtrend from the February highs above 1.2550.
  • An above-forecast US July non-farm payrolls and wage growth number would only bolster the already bearish technical setup.

The EUR/USD is on the defensive ahead of the US non-farm payrolls release.

The currency pair closed at 1.1584 on Thursday, confirming a downside break of the 1.5-month-long pennant pattern. So, the doors are open for a drop to 1.15 and the move will likely happen today if the US non-farm payrolls and wage growth number betters estimates.

On the other hand, a weaker-than-expected print may allow EUR/USD to re-test the resistance at 1.1627 (lower end of the pennant), although bulls are cautioned against being too ambitious as the gains could be short-lived, courtesy of CNY slide.

A sustained rally in the EUR/USD looks like if CNY stages a sharp corrective rally and the US data misses estimates by a big margin.

At press time, the currency pair is trading at 1.1590.

The data scheduled for release today at 12:30 GMT is expected to show that the US economy created 190K jobs in July compared to 213K jobs created in June.

Meanwhile, wage growth or average hourly earnings are seen rising 0.3 percent month-on-month in July, up from the 0.2 percent rise in June. And last but not the least, the jobless rate is seen falling to 3.9 percent from 4.0 percent.

EUR/USD Technical Levels

Key resistance: 1.1627 (lower end of the pennant now acting as a resistance), 1.1641 (50-hour moving average), 1.1663 (10-day moving average).

Key support: 1.1575 (July 19 low), 1.1527 (June 28 low), 1.1508 (June 21 low).