After strong gains in the last week of July, EUR/USD pulled back in the prior week on the back of a strong US Dollar.
The currency pair breached above resistance at 1.1188 following above expected unemployment change numbers from Spain in the early week. Stronger PMI figures released out of the euro area shortly after, failed to sustain the rally, as the pair turned lower and broke back below the level following an above expectation print in ADP non-farm employment change numbers. The market mover in the past week was the NFP release on Friday, an above-expected rise of 225,000 in the figure sent the currency pair over 200 points lower on an initial reaction, a bounce from lows has kept the pair trading above its 200 period daily moving average.
The 200 DMA in the pair has had less of a technical influence as the exchange rate traded around the indicator for most of July, but can provide some support in the early week. The upcoming week may be a slow week for the pair, as it carries less market-moving data releases.
On Wednesday, US JOLTS job openings will shed some further light on the US labor market, the data release stands to provide volatility to the pair, but is less likely to cause a drastic fluctuation in the exchange rate, or trigger a reversal. Further labor data is released on Thursday with the weekly US unemployment claims numbers, while on Friday, a set of data releases stands to cause a high impact in the exchange rate. GDP figures will be released from Germany and are expected to show growth rising at 0.3% on a quarterly basis, growth was reported at 0.7% in the prior reading. Flash GDP is scheduled later in the day from the Euro area, the figure is expected to show 0.3% growth on a quarterly basis. US Retail sales are also scheduled on Friday, the data has come in above expectations in the past three monthly readings. Analyst expectations have been set for a rise of 0.4% against a prior reading of 0.6%, while the core figure is expected to rise 0.2% against a rise of 0.7% in the prior reading.
Positioning in the Euro remains at a historically high levels, while a slight drop was disclosed in the COT report. The net-short position held by non-commercials reduced by $857mn to $14.61bn in the week to August 2.
Optimism among rate hike speculators increased following the stronger NFP figure out of the United States. Swap traders are now pricing in a 38.4% probability of a rate hike December, up from 30.1% at the start of the week. The figure is relatively unchanged from what the CME reported ahead of the FOMC statement in late July.
The FOMC statement release caused a sharp bounce from a rising trendline connecting December lows to the Brexit spike lows. The rally resulted in weekly bullish candle print that engulfed the prior three weeks of declines. The pullback from the past week should see some buyers as the weekly print remains in play. The 200 period daily moving average will be a first reference for traders in the early week, while strong support is seen at 1.1023, the level came into play in December, and has been shown to be respected on the daily chart. On a 4-hour chart, prior resistance at 1.1188 can once again introduce sellers, while a declining trendline from early May highs shows strong resistance near the 1.1250 area.