Welcome to a brand spankin’ new trading month, forex playas!
Today we’re looking at EUR/USD possibly taking a short break from its downtrend.
Are you seeing what we’re seeing on the 1-hour time frame?
EUR/USD 1-Hour Forex Charts by TV
If you’ve seen our EUR/USD setup last week, then you’ll know that EUR bears have been on a roll with dragging the common currency lower against the U.S. dollar.
But EUR/USD is now sporting a possible Reverse Head and Shoulders pattern after it found support from the 1.0500 psychological handle and forming “shoulders” near the 1.0570 Pivot Point line.
And why not? Aside from a bit of risk-taking, data released earlier today showed the final PMI readings from Eurozone economies like Spain, Italy, and France were revised higher than their initial estimates.
Will the start of a new month convince some bulls to take on some risks?
Remember that this week’s U.S. jobs reports are expected to project a resilient labor market. While the headline NFP is expected to print lower, we may also see a lower unemployment rate and faster hourly earnings growth.
So, until we see a clear upside breakout, EUR/USD will likely continue to feel the heat of the Fed’s hawkish biases. If you recall, Chairman Powell and his team are penciling in at least one more interest rate hike before the year ends.
This is why we’re still looking for areas to short EUR/USD.
The 1.0600 “neckline” area looks good as it’s already served as support and resistance and is currently near the chart’s 200 SMA.
In the event of an upside Reverse Head and Shoulders breakout, we can consider selling near the R1 (1.0660) Pivot Point level which was also an inflection point last week.
The 1.0500 previous low is a good target if you’re anticipating further EUR/USD losses but you can also aim for new multi-week lows if there’s enough bearish pressure in the next few days.
What do you think? Is EUR/USD ready for an uptrend? Or is it just taking a breather from a longer-term downtrend?
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