The Euro dropped briefly below 1.12 yesterday after it took off to retest the recent highs, 1.13. The ECB surprised market participants when Draghi hinted of a possible interest rate cut if the economy slows down even more. The possible drop in rates confused traders as both central banks (Fed & ECB) are willing to cut to accommodate the economy. Today’s NFP results can be crucial, a big miss on payrolls and wage growth data would increase the probability of Fed rate cuts and will likely result a broad-based US Dollar sell-off, taking the Euro possibly above 1.13. Traders, however, would scale back their expectations of Fed rate cuts if the payrolls and wage growth data blows past expectations. In that case, EUR/USD will likely revisit 1.12 or below.
The Euro retested 1.13 during yesterday’s session, possibly printing a Double-Top formation, but price needs to confirm this pattern by first breaking below 1.1220. 1.1262 is the line in the sand for now, a break below it would send the common currency to retest 1.1220 or even 1.12. However, if the bulls hold that level, they can push the price higher towards 1.13 and possibly even more.
Support: 1.1262 / 1.1220
Resistance: 1.13 / 1.1320