Is the EUR/USD headed for 1.1900, driven by NFPs, for the weekly close?

August 07, 2020 11:30

Source: Economic Events August 7, 2020 - Admiral Markets' Forex Calendar

The Euro continued to profit from ongoing US dollar weakness and the drift lower in US Treasury yields which closed at new all-time lows.

In fact, the USD weakness for the start of this trading week may come as a surprise to some after recent US economic projections. Some, like Monday's ISM Manufacturing data set, continued to improve, coming in at 54.2 in July against an expected 53.6, with new orders having risen sharply (61.5 vs 56.4 in June).

Traders were probably smelling something fishy given the failed attempt for US yields to gain momentum and, in fact, Wednesday's ADP payrolls saw a huge miss, rising by a meagre 167,000 compared to an expected 1.2 million, showing that only 40% of lost jobs have been recovered out of the total 19.7 million jobs lost since March and due to the Corona lockdown.

So, with expectations rising that the Fed will continue to weaken the US dollar by putting further pressure on US yields as they are expected to go for a run as low as 0%, which leaves the US dollar in a lose-lose situation. If better-than-expected NFPs don't deliver the fuel for a EUR/USD correction, disappointing NFPs (which are likely, given the ADP miss) could accelerate the move higher in the currency pair, pushing the EUR/USD towards 1.1900 into the weekly close.

Nevertheless, from a trader's perspective, we'd prefer a short-term correction towards 1.1400/30 since this would deliver a trading setup with a more attractive risk-reward ratio.

Technically, the mode stays bullish on a daily time-frame as long as we trade above 1.1150/1200:

Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between June 7, 2019, to August 6, 2020). Accessed: August 6, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EUR/USD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, 2019, it fell by 2.2%, meaning that after five years, it was down by 7.3%.

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