EUR/USD is traded back below 1.2 after breaking below the former low. USDX's current growth pushed the pair lower. Yesterday's better than expected US data have boosted the greenback which appreciates versus all its rivals and not only versus the Euro.
The pair is into a corrective phase so it could approach and reach the 61.8% retracement level if the US Dollar continues to increase. EUR/USD drops even if the Eurozone Final Services PMI, CPI Flash Estimate, and the Core CPI Flash Estimate have beaten expectations yesterday.
The US Unemployment Claims could drop from 847K to 828K in the previous week, while the Factory Orders could increase by 0.7% which will be great for the USD. Also, don't forget that the US will publish the NFP, Average Hourly Earnings, and the Unemployment Rate tomorrow.
The Non-Farm Payrolls could exceed the 62K estimate after the positive surprise produced by the ADP Non-Farm Employment Change.
EUR/USD Drops Like A Rock!
EUR/USD has managed to close under the S2 (1.1999) at the time of writing signaling once again that the selling pressure is huge. The immediate downside targets are represented by the 50% retracement level and by the descending pitchfork's lower median line (LML).
Reaching these levels could lead to a broader drop in the end. Personally, I'm expecting to see a downside breakout through these levels if EUR/USD touches them.
Technically, EUR/USD is expected to extend its corrective phase after dropping below 38.2% and under 1.2053 former low. The bearish outlook remains intact, EUR/USD should drop deeper as long it stays under the descending pitchfork's median line (ML) and below the 38.2% retracement level.
Trading Tips & Forecast!
The current aggressive breakdown through 1.2 psychological level signals further drop. Closing below the 50% and under the lower median line (LML) indicates that EUR/USD will drop at least until 1.19, around the 61.8% retracement level.
Its failure to come back to retest the 38.2% represented a selling signal. Escaping from the descending pitchfork's body could indicate a larger drop below 1.19, which practically validates a bearish reversal.
Still, a major bullish engulfing in this support area (1.2, 50%) or a false breakdown with huge separation could bring a bullish momentum in the short term towards the median line (ML).
