The Euro tested the upper border of its trading range and bounced. There are many reasons for explaining the move upwards, and one good reason for not seeing a break.
EUR/USD went as high as as 1.4480 – an important resistance line, and then fell back down to the low 1.44s. Since December 16th, the pair ranged between the support line of 1.42 to the resistance region of 1.4444.
As mentioned in the EUR/USD forecast, there isn’t a single point of resistance but rather a region: 1.4444 was the resistance line during the summer. After this pair broke his line, it stalled for a while, and the bottom border before continuing upwards was 1.4480.
After the fall on December 16th, this range effective resistance. EUR/USD traded below 1.4444, but today it stretched itself towards 1.4480 before bouncing back.
There were a few reasons for the Euro to rise:
- The number of unemployed people in Germany fell again, surprising economists again. This improvement in the continent’s largest economy is a good sign.
- CPI rose by 0.9%: Inflation is picking up in Europe, after suffering from a long period of deflation. Although this exact rise was predicted, it still supplies hope for a rate hike.
- American Pending Home Sales fell by 16%! A fall was expected after 9 straight months of rises, but this big scale wasn’t predicted. Following the drop in the new home sales two weeks ago, there’s a growing notion that the economy is still very dependent on the stimulus actions by the government. When the aid is withdrawn, the economy is down again.
The only dollar positive news was a higher-than-expected growth in US factory orders. This cannot explain the fact that EUR/USD didn’t make a breakout.
The reason that I see for no breakout is the big event ahead: Non-Farm Payrolls. This event sets the tone for this week’s trading and for a few weeks ahead. So – the market awaits the NFP, which might finally show growth in jobs after two years. And during the tense days and hours before this release, a breakout isn’t likely.
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