Be careful out there
The EURUSD has with whipped around as the traders digest the implications of the jobs report that saw weaker job gains, a lowered unemployment rate, higher wages.
The initial move was to sell the dollar, buy the Nasdaq/sell Dow and take yields lower. Now, the
- Dollar has retraced the declines in the major currency pairs
- US stocks have moved lower although the major indices are trading above and below unchanged currently
- The 10 year yield is now higher at 1.32%. It traded as low as 1.283%
For the EURUSD, the pair initially moved sharply higher peaking at at 1.19085. That high tested the July 30 high at 1.19081, found sellers, and reversed the entire gains, moving to retest the low for the day (the pair actually made a new low at 1.1865).
Since then, the pair has moved back higher with the price retesting the 1.1900 level. Swing highs from July 29 through August 4 saw swing highs reach 1.18928, 1.18965, 1.18992 1.19081. The high price off the low just reached 1.1898.
Needless to say, the price reaction is volatile as traders try to fit the pieces of the puzzle together.
We do now is that we have a double top at 1.1908. The price is higher for the ninth out of 10 consecutive days. In August, the trend was initially toward a higher dollar, but is now more in the favor of sellers, but there is lows of uncertainty that still needs clarification from data as well as unknowns.
- Will workers return to the workforce after children go back to school?.
- Will the Delta virus slow down and lead to more herd immunity?
- What about the supply chain issues and implications on inflation?
- Will Chair Powell hold the line on delaying the taper or will he be influenced by the other Fed officials who feel it is not doing any good to the economy (could be doing harm)?
The ambiguity/uncertainty caused by the data today doesn’t make it any easier and as a result, traders are being whipped around.
Nevertheless what we do know is if the price can get above the double top at 1.1908, the buyers should pushed the pair higher purely from a technical perspective.
Absent a break to new highs (and we could easily see sellers with stops above the high) and there could be more probing to the downside as the ups and downs continue.
Be careful out there.