EUR/USD Weekly Forecast September 4-8
Frankfurt (Sept 3) EUR/USD declined in the past week after a failed early week attempt to rally above the psychological 1.2000 handle. On a monthly basis, the pair closed the month of August with a small gain which was its sixth consecutive monthly gain.
The currency pair reached a high of 1.2070 on Tuesday but quickly dropped lower to close the day out with a small loss. The pair extended lower in the week before finding support at 1.1824 on Thursday while Friday’s US jobs report triggered some volatile fluctuations.
NFP figures for August fell short of expectations with a headline gain of 156,000 which was below the analyst consensus for an additional 180,000 jobs. Further adding to the disappointment was a downward revision for July to 189,000 from the originally reported jobs gain of 209,000.
The unemployment rate ticked back down to 4.4% from 4.3%, also missing expectations and average hourly earnings were reported at 0.1%, falling short of an expected 0.2% and following a rise of 0.3% in the prior month.
EUR/USD briefly returned to positive territory for the week following the release, but failed to sustain gains and closed near prior lows for the week.
A horizontal level at 1.1824 was a well-respected level in August, acting as resistance on four separate events and providing support for the pair in the past week. The level will remain important support for the pair in the upcoming week, especially as a rising trendline from originating from a low posted on July 5th is within proximity.
The major hurdle to the upside remains at the psychological 1.2000 handle. Although the exchange rate initially overshot the level, the failure to hold above it emphasizes its importance.
The focus in the upcoming week will shift from US data to European monetary policy as the ECB are scheduled to deliver their latest rate decision and hold a press conference. The ECB is not expecting to announce a rate change but expectations have been growing that policymakers will announce a further tapering of their asset purchase program. Any comments regarding the rising exchange rate will also be important.
In the latest COT report, non-commercials were reported to hold their net long euro position essentially unchanged in the week to August 29th. There was a small decline in both the gross long and gross short and the net position was reported to be held long 86,519 contracts, remaining near the highest level seen in over six years.
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