Last trading week ended with the most important data on the US labor market, which as a rule, are published on the first Friday of each month. In this article, we will summarize the results of this significant event for the world financial markets, and also try to predict the future direction of the main currency pair of the Forex market. According to the US Department of Employment, in January, the number of new jobs created in the non-agricultural sectors of the US economy was slightly weaker than the forecast value of 50 thousand and in fact amounted to 49,000. As for the average hourly wage, this important indicator grew worse than expected, which was reduced to 0.3%, and the actual wage growth in January was 0.2% in the states. However, the unemployment data pleased investors as it turned out to be surprisingly very good. It was expected that the unemployment rate would remain at the previous level of 6.7%, but the data for January were much stronger, and the indicator came out at 6.3%. Given that both Non-farm Payrolls report and wage growth were slightly worse than forecast values, and the unemployment rate showed a significant decline, in general, the data on the US labor market could not be considered negative for the US currency, but the market regarded it differently.
Weekly
Taking into account the previous, almost weekly, growth of the US dollar, as well as the last trading day of the outgoing week, investors began to take profits on purchases of "green," which led to a corrective pullback of the main currency pair of the Forex market, which still managed to finish the trading week significantly above the psychological level of 1.2000, at 1.2043. In addition to the expected profit-taking and not so unambiguous US labor reports, from a technical point of view, the blue line of the Ichimoku Kijun indicator played a very important role, which provided the quote with quite strong support and provoked a significant rebound from the lows of 1.1952. This development of events was quite possible to assume. It is not for nothing that in almost every review of a particular currency pair, I pay attention to the Ichimoku indicator, or rather to the boundaries of its cloud, as well as to the Tenkan and Kijun lines. In the author's personal opinion, this indicator is most effective on the weekly and daily charts, but on the four-hour chart, for example, there are quite a lot of false signals and noise.
Going back to the results of the past week, it turned out to be extremely ambiguous against the US dollar. About half of the main competitors strengthened, and the other half showed a weakening against the US currency during the week's trading. The euro also fell into the second category, with the pair losing 0.71% in trading on February 1-5. If we summarize the description of the weekly EUR/USD timeframe, then the last candle with a long lower shadow and a confident close above 1.2000 leaves more questions than answers about the price direction of the quote at the auction of the current five-day period. To continue the downward trend, the bears on the pair need to update the previous lows at 1.1952 and close trading on February 8-12 below this level and, accordingly, under the Kijun line. In turn, the players on the increase in the course of the task is radically different. Euro bulls need to return the rate above the price zone of 1.2050-1.2060, pass up the strong mark of 1.2100 and finish the current week above the red line of Tenkan, which passes at 1.2150. Given the strength of this technical level, as well as the very difficult mark of 1.2100, it will not be easy to do this. But when was everything easy, clear, and simple in the market?
Daily
On the daily chart of the main currency pair, as a result of Friday's growth, a reversal candle signal "Bullish absorption" appeared. At the same time, the pair returned above the 50th fibo level from the growth of 1.1601-1.2349, and also closed trading on February 5 above the black 89 exponential moving average. This factor once again confirms the hypothesis that one candle closed above or below the level, line, or moving average is clearly not enough to consider the overcoming of these obstacles (their breakdown) true.
In case Friday's growth continues, the nearest target for the EUR/USD bulls will be 1.2063, where the fibo level is 38.2, where the red line of the Ichimoku Tenkan indicator is located, which can add a headache to the players for an increase in the exchange rate, since in this particular case it will act as a rather strong resistance. However, even the passage up of 38.2 fibo and Tenkan will not give an accurate answer regarding the further direction of the quote. In order for the bullish sentiment on the euro/dollar to take a clearer shape, it is necessary to break through the resistance line 1.2344-1. 2155 (plotted on the chart), then output the price up from the daily Ichimoku cloud, right on the upper border of which are 50 MA and the blue Kijun line. It is characteristic that 50 MA with Kijun are in the area of 1.2150, which will most likely be the key if the quote can rise to it.
Trading recommendations for EUR/USD
Despite the ambiguous closing of weekly trading and Friday's reversal candle pattern "Bullish absorption," at this stage, sales retain their priority and continue to be the main trading idea for the euro/dollar. Expected levels for opening short positions: 1.2070, 1.2088, 1.2100, 1.2110, 1.2135, and 1.2150. If we consider possible purchases, technically they look good from 1.2020, 1.2000, 1.1977, and 1.1963. In tomorrow's article, we will look at smaller time frames, and if necessary, we will make adjustments to these trading recommendations.
Good luck!
