EUR/USD establishes new support at 1.1789 ahead of US Nonfarm Payrolls
- EUR/USD charted a long-legged Doji on Thursday, establishing 1.1789 as key support.
- The immediate bearish bias has been neutralized ahead of the US Nonfarm Payrolls release.
- A below-forecast payrolls figure is expected to yield a notable dollar sell-off.
EUR/USD now has strong support at 1.1789. On Thursday, the pair fell to that level only to rise back to 1.1850 by the GMT close. Essentially, EUR/USD carved out a classic long-legged Doji candle on Thursday, aborting the immediate bearish bias and establishing 1.1789 as the level to beat for the sellers.
Focus on US data
The Nonfarm Payrolls, scheduled for release at 12:30 GMT, is expected to show the US economy added 1,400K jobs in August following 1,763K additions in July. Economists expect the jobless rate to drop to 9.8% from 10.2%, and the annualized growth in Average Hourly Earnings to slow to 4.5% from 4.8%.
BK Asset Management's Kathy Lien expects the dollar to have a more significant reaction to a weak number than a strong one. "Market sentiment is beginning to turn, the outlook for the economy is uncertain, and if data misses, investors will worry that it will deteriorate in the fall," Line noted in her daily market analysis.
In other words, a below-forecast reading could propel EUR/USD higher toward 1.19. On the other hand, a big beat on expectations could be viewed with skepticism, as August's number is almost always distorted due to seasonal factors and is revised in the following months. Also, upbeat data will likely restore the US stock markets' risk sentiment and weaken the haven demand the dollar.
From a technical analysis perspective, acceptance under Thursday's low of 1.1789 would imply a continuation of the sell-off from recent highs above 1.20.
While the US calendar boasts of tier one data release, the Eurozone economic calendar is relatively light with just German Factory Orders for July, scheduled for release at 06:00 GMT. The backward-looking data is unlikely to have a notable impact on the EUR unless it beats or misses expectations by a significant margin. At press time, the pair is sidelined near 1.1850.
Technical levels