The EURUSD currency pair has rebounded from Tuesday’s fall and is once again trading near the 3-week high of 1.075. This level is a strong resistance, which will be quite hard to break through without support from the news background. Even if the bulls manage to do it, there will be a question of consolidation at the achieved levels. Given today’s expected events EURUSD quotes are at a high risk of reversing and declining to the level of 1.067.
The U.S. statistical authorities will present the labor market report for April on Friday. In recent months, unemployment, job creation, and wages have been consistently better than analysts' expectations. Exceeding forecasts, in turn, led to a significant strengthening of the dollar in the global foreign exchange market. This scenario may well happen again, and EURUSD will be under serious pressure.
The euro’s upward movement over the past few days was driven by the EU GDP data release for the 1st quarter. The European economy rose by 0.3% exceeding the market participants’ consensus forecast of 0.1%. At the same time, inflation is no longer slowing down, indicating a limited opportunity for the ECB to cut interest rates. However, expectations of monetary policy easing in June are still valid, while the Fed is unlikely to make a similar move before the fall.
It is also worth noticing the structure of EU economic growth. Almost all of the GDP increase is provided by the service sector, while the region's industry continues to stagnate. This fact is confirmed by the PMI data for April, which showed weak demand and lower employment in Europe's manufacturing sector. In this regard, further growth of the euro, especially against the dollar, looks doubtful.
The RSI indicator is approaching the overbought zone on the daily chart of EURUSD, increasing the likelihood of an imminent quotes’ reversal downwards. As a short-term target, the bears can choose the local lows of the current week near the level of 1.067.
Consider the following trading strategy:
Sell EURUSD near the 1.075 level. Take profit – 1.067. Stop loss – 1.08.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion
This content is for informational purposes only and is not intended to be investing advice.
