This dollar pair had a strong bearish reaction to Friday’s NFP, so it might be in for more downside early this week.
But could it go for a short-term pullback or a sustained break below the latest lows?
Here’s what I’m watching on the 15-min chart.
EUR/USD 15-min Forex Chart by TV
EUR/USD is cruising below a descending trend line connecting the latest highs, and it looks like another test of resistance is underway.
Applying the Fibonacci retracement tool shows that this potential ceiling lines up with the 61.8% level, an area of interest, and R1 (1.0850).
A shallow pullback could already find sellers at the 38.2% Fib at 1.0813 near the pivot point and 100 SMA dynamic resistance or at the 50% Fib at 1.0826.
If any of these levels are able to keep gains in check, EUR/USD could fall back to the lows at 1.0770 or create fresh ones at S1 (1.0740) then S2 (1.0700).
Technical indicators are pointing to a continuation of the slide, as the 100 SMA is below the 200 SMA to reflect bearish vibes while Stochastic looks ready to move south.
Fundamentals also seem to be aligned for another wave lower for this pair, as the August NFP report and ISM manufacturing PMI triggered a sharp dollar rally last Friday.
Price action from previous releases shows that the post-NFP reaction tends to carry over to the start of the next trading week, barring any major catalysts that could drastically impact market sentiment.
This seems to be the case so far this week as U.S. banks are closed for the Labor Day holiday, leaving market players with not that much to chew on ahead of the central bank decisions later on.
If dollar bulls are too excited to charge again, watch out for a sustained bearish move in case price breaks below the swing low once U.S. markets reopen on Tuesday.
Don’t forget that the euro has been on shaky ground recently, as the latest slew of mid-tier data points underscored the ECB‘s shift to a less hawkish policy stance.
Just be sure to practice proper risk management and account for the average EUR/USD volatility when trading this one!
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