Yesterday, the euro tested the support level of the MACD indicator line, but it didn’t dare to break below the support level of 1.0924. Market participants are evidently unsure if today’s labor data, despite the good private sector employment figures from ADP released on Wednesday, will turn out to be positive.
The negative correlation between ADP and NFP is due to the summer period of labor transfers to the private sector. The notable decline in the ISM Manufacturing Employment Index for July to 44.4 from 48.1 in June also indicates weakness in the labor market.
There are other assumptions as to why the market is preparing to buy euros: an aggressive pivot by the Federal Reserve to policy easing in case of strong labor data, and an increase in risk appetite. As we have already described, we expect a significant turnaround in the euro for the medium- and long-term decline, synchronous with the stock market.
The stock market can calmly grow not only on good or moderately weak data, but also after the “shake-up” caused by the downgrade of the US credit rating, thereby increasing risk appetite in adjacent markets. Yesterday, the Dow Jones only declined by 0.19%, and this morning, Asian stock markets are already in the green.
We have an interesting situation in our hands – regardless of the employment data, the euro may show growth. A corrective rise in the euro is possible towards the target level of 1.1092, which coincides with the Fibonacci level of 50.0%.
With the upcoming price reversal on the 4-hour chart, the Marlin oscillator may soon move into positive territory and fully join the uptrend. On the way to 1.1092, there is an important resistance level at the MACD line (1.1040, close to the July 31st peak).
Overcoming this level will allow the price to extend growth. If the price stays below 1.0924, the single currency may fall with the first target level at 1.0865. There is a 60% probability of growth.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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