EUR/USD: Bearish Structure Across Multiple Timeframes

Today's trading in the EUR/USD will be dominated by the release of the US NFP. This is an occasion for market participants to re-assess the state of affairs in the US economy, which for now remains in rude health as indicators indicate.

Looking at the daily timeframe, the combination of a bearish outside day on Thursday, followed by a rejection of the support-turned-resistance at the 1.15 vicinity is a testament of the control sellers are exerting in price action. Besides, the breakout of the major support at 1.15 came amid an increase in tick volume coupled with a concurrent negative input emanating from higher Italian bond yields and lower German vs US 10-yr bond yields (both at multi-year high and low respectively). To sum up, in the daily, there is no indication that the tide may be turning against the sellers, barring a disappointing US NFP report later today. Also, be reminded that in the daily a significant void area exists until the next support at 1.1350.

When deconstructing the structure in the hourly chart, we remain in a solid bearish trend, with the latest selling rotation expanding by a magnitude of 130 pips vs 126 the previous swing, which indicates that the downtrend should see a further extension to at least re-test the previous low at 1.1460, that seems to be the most imminent risk near term. The bearish structure suggests that the strategies aiming to exploit downside moves from 1.1530 up to 1.16 may see a distinctive advantage. Here, it is down to each trade, how they will enter the market based on one's personal strategy. Looking at the potential downward targets based on the latest swing low, 1.14 appears to be the next target (round number and 50% fib projection).

To summarize: Cycles, volumes, levels, fundamentals, correlations and risk reward, seem to be all in alignment for a continuation of the downtrend. That said, be reminded that once the US NFP is released, disregard the most immediate levels and re-assess.

Note: Each scenario has been prepared without taking into account your objectives, financial situation or needs or trading plan. Before acting on any information or advice, you should consider the appropriateness of it having regard to your circumstances. Please read our Financial Services Guide and current offer document which is available to be downloaded from www.globalprime.com.au or hard copies may be sent by contacting us on the details provided on this website.