Hello dear colleagues!
EUR/USD closed the last trading week with a minor decline. Last week, the pair shed 0.25%. Interestingly, the euro incurred the least losses against the US dollar among other major currencies. Let's discuss the technical picture on EUR/USD a bit later. Now I suggest looking into the US nonfarm payrolls released on Friday.
The US Labor Department reported that the unemployment rate remained at 6.7% in December, though the consensus supposed a tick to 6.8%. This is a positive factor for the US labor market and the whole economy. On the flip side, the number of new jobs in the private and public sectors decreased by 140,000, though the consensus had suggested -71,000 jobs. Such a sharp deviation between the forecast and the actual figure is seen as a negative factor. At the same time, the previous reading was upgraded to 336,000 new jobs from 245,000.
The US Federal Reserve warned a few times that the US economy eased a peace of recovery from the pandemic-driven crisis. This trend has been mirrored in the fresh nonfarm payrolls. When it comes to average hourly earnings, wages jumped 0.8% in December, much stronger than the expected 0.2% gain. Such a record rise in wages came as a pleasant surprise to investors. To sum up, the fresh data on the US labor market turned out to be mixed. Investors are especially pleased about the wage growth that makes a direct impact on inflation. Besides, the unemployment rate surpassed expectations.
The event of crucial importance last week was the assault on the Capitol Building by supporters of outgoing President Donald Trump. From my viewpoint, this outrageous event will smash a further political career of the 45th US President who will hardly be ever elected to rule the White House. In fact, Washington created and promoted the American ruling pattern as the sample of democracy that was wrecked down by violent clashes of pro-Trump protestors. Anyway, this is a theme for another article. Now let's go back to our technical charts of the most traded currency pair.
Weekly
According to the candlestick analysis for the trading week of January 4-8, the weekly chart of EUR/USD formed a reversal pattern called Gravestone doji. This pattern is rather powerful, so the market frequently takes in into account. Apart from it, there is an extra signal for a decline, i.e. the bearish divergence of the MACD indicator. Another thing to take notice of is that the previous candle with the white body also reminded the Gravestone pattern. Its long upper shadow indicates that the euro bulls find hard to push the price further upwards. The second candle straight with the bearish body is situated above which confirms a possible trend reversal. EUR/USD closed the week at levels much below strong resistance levels at 1.2309 and 1.2272. This is another weighty argument of EUR/USD's trend reversal from bullish to bearish. All in all, personally I reckon that the weekly chart has generated a full picture indicating a decline of the most popular currency pair.
Daily
Let me start the description of the daily chart with a remark that this timeframe also formed a bearish divergence of the MACD indicator. It confirms that the pair is overbought, thus indicating a decline of its price. In fact, EUR/USD has already begun its slide. On January 6, the pair dropped seriously from the highs of 1.2349. Importantly, the session on January 8 finished with the price approaching the key support of 1.2215. On the other hand, the key resistance is 1.2309-1.2349. In case 1.2215 and 1.2200 are broken and the price fixes below, EUR/USD is expected to sink further to 1.2130. In case there is a true breakout of that level, the bearish scenario will be in the cards with the nearest downward target of 1.2050-1.2000. The currency pair will get the second wind to revive the bullish trend provided that the price overcomes 1.2350 with confidence.
Conclusion and trading tips on EUR/USD
We've just considered the charts with the two most meaningful timeframes. Both of them signal a change of the bullish sentiment to the bearish one. Besides, a variety of technical indicators also reveals the trend reversal to the bearish one. It is still difficult to say for sure whether it is will be a correctional decline or a full-fledged trend reversal. The most feasible outlook could be the bearish scenario. In this context, it would be good idea to figure out short positions on EUR/USD after the pair makes attempts to grow again to 1.2260, 1.2270, and 1.2300. You could try even earlier to sell EUR/USD during its attempts to climb above 1.2235/40. I would advise you to delay opening long positions for a while.
Good luck in trading!
