EUR/USD Faces Uphill Task, Dollar Consolidates

Technical analysis of Forex market

Key Highlights

  • EUR/USD failed to clear the 1.2250 resistance and corrected lower.
  • It broke a major bullish trend line forming with support near 1.2175 on the 4-hours chart.
  • GBP/USD is still holding gains above 1.4100.
  • The US nonfarm payrolls increased 559K in May 2021, less than the market forecast of 650K.

EUR/USD Technical Analysis

The Euro made a few attempts to gain pace above 1.2250 and 1.2260 against the US Dollar. EUR/USD failed to continue higher and it corrected lower below 1.2200.

Looking at the 4-hours chart, the pair topped near 1.2260 before it corrected lower. There was a break below a major bullish trend line with support near 1.2175. The pair even settled below 1.2200, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

There was a sharp decline below 1.2150. The pair traded close to 1.2100 and a low if formed near 1.2103. The pair recovered later and climbed above the 1.2150 level.

To move back into a positive zone, the pair must clear the 1.2180 level and the 100 simple moving average (red, 4-hours). The next key resistance is near 1.2220, above which the pair could rise towards 1.2260.

If not, there is a risk of more losses below the 1.2120 and 1.2100 levels. The next major support is near the 1.2065 level.

Fundamentally, the US nonfarm payrolls report for May 2021 was released this past Friday by the US Bureau of Labor Statistics. The market was looking for an increase of 650K.

The actual result was lower than the market forecast, as the US nonfarm payrolls climbed 559K. Besides, the last reading was revised up from 266K to 278K.

Overall, the US Dollar is consolidating losses. If EUR/USD remains stable above 1.2100, it could rise back to 1.2250. Similarly, GBP/USD is likely to climb higher as long as it is above 1.4100.

Economic Releases

  • German Factory Orders for April 2021 (MoM) – Forecast +17.3%, versus +27.8% previous.
  • Swiss CPI for May 2021 (YoY) – Forecast +0.6%, versus +0.3% previous.