Yesterday, the euro-dollar pair failed to settle below the support level of 1.0660 (Tenkan-sen line): having reached 1.0627, the price reversed 180 degrees and again headed towards the borders of the 7th figure. Today EUR/USD bulls received support from US statistics. "Thanks" to the ADP report, the pair broke the 1.0700 mark, offsetting the bears' downward ambitions. Leaving aside the intraday volatility, we can conclude that traders failed to leave the 1.0660-1.0780 price range, despite the fact that yesterday the pendulum swung in favor of the greenback. However, market sentiment has already changed today: oil has retreated from multi-year price highs, and the ADP report mentioned above disappointed investors with its "red color".
Looking at the EUR/USD weekly chart, we can see that the pair has been steadily rising over the previous two weeks, bouncing off 5-year price lows at 1.0348. However, this week the upward corrective growth has clearly stalled. For the development of an upward trend, bulls need not only to overcome the resistance level of 1.0760 (the lower boundary of the Kumo cloud on the D1 timeframe), but also to settle above the target of 1.0800 in order to qualify for further growth - up to the borders of the 9th figure. Despite rather favorable fundamentals earlier this week (easing of COVID restrictions in China, US President Joe Biden's reflections on partial tariff cuts on Chinese imports, hawkish signals from the European Central Bank, record inflation growth in the EU and Germany), EUR/USD bulls did not hold their highs, remaining within the 120-point range, the boundaries of which are limited by 1.0660-1.0780.
Traders need a more powerful information driver. We need a news impulse that can push the pair out of the grip of a temporary flat. That is, either the price decreases to the bottom of the 6th figure and in the medium term goes to the area of 5-4 figures, or the price confidently overcomes the target of 1.0800.
The most important macroeconomic report of the week will be published tomorrow - Friday. May Nonfarm will either strengthen the position of the greenback, or allow bulls to organize an upward push again. There is no need to talk about a trend reversal yet: given the current fundamental background, the EUR/USD bulls can only count on a large-scale correction, which is a priori temporary and, as a rule, very fleeting.
Today there was a very disturbing signal in the form of a weak report from the ADP agency, which is a kind of petrel in anticipation of the Nonfarm. If the official figures follow the trajectory of this release, the dollar will again come under significant pressure. To date, the consensus forecast for official data suggests that the labor market in May will show a positive trend. According to experts, 325,000 non-farm payrolls were created in the United States last month (in April, this figure came in at 428,000, exceeding forecast estimates). In the private sector of the economy, the increase should be 340,000. But the unemployment rate should fall again - this time to 3.5%.
In a separate line, you should pay attention to the inflation component of Nonfarm - an indicator of the average hourly wage. A month ago, this indicator came out at the level of 0.3% in monthly terms. In annual terms, the increase was 5.5%. According to forecasts, in May, the average hourly wage (compared to the same period last year) will increase by 5.2%. That is, the May result will reflect a slight slowdown in growth. For the bulls of the pair, it is necessary that the Friday release announced the resumption (continuation) of positive dynamics. The inflationary component of Nonfarm is now important for EUR/USD traders, even outside the context of growth or decline in the number of employees.
Returning to today's ADP report, it should be noted that it disappointed the dollar bulls. According to the calculations of this agency, the number of people employed in the US non-farm sector increased by only 128,000 in May (against a forecast of 300,000). Thus, taking into account today's release, a certain intrigue regarding Friday's data remains. In my opinion, dollar bulls can now at least not count on exceeding the forecast values. If the official figures do not reach the predicted levels at all, then EUR/USD bulls will have a reason for another upward rush to the borders of the 8th figure.
Thus, traders of the pair are still trading within a wide price range, despite yesterday's attempt to escape to the bottom of the 6th figure. The disappointing ADP report, as well as the decision of OPEC+ to increase oil production by 648,000 barrels per day in July (and most likely in August) allowed EUR/USD bulls to carry out a successful counterattack - they partially regained the points lost yesterday. In my opinion, it is risky to open short or long positions on the pair now, as traders have not decided on the price movement vector. The ADP report is alarming, but the official figures do not always correlate with the agency's data. And if Friday's release comes out in the green zone, the bears will have a chance to turn the tide in their favor. Therefore, before the release of Nonfarm, it is best not to open trading positions - neither towards the upside, nor towards the downside.
