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Strongly weakened chart picture for Eur/Usd. After failing to return above 1.19 or so, the pair reversed course and then accelerated to the downside at the publication of U.S. employment data, which fell to 5.4% from the previous 5.9%, in the direction of the line that has been rising since last November, already tested in July at 1.1780 or so. Below 1.1780 and if the 1.1750 area is breached, the scenario could worsen further, with the end of March/beginning of April lows at 1.17, an intermediate target along the way that could take prices back to the critical supports at 1.16/1.1630. The short-term chart could instead improve beyond 1.1908, the high of July 30, a prologue to an extension towards 1.20 or so, a crucial reference in the medium term.
Despite the fact that last week was a week in favour of the euro, we had urged investors to be cautious (The euro surges against the dollar, but the last session of the week could be fatal). In fact, the euro had not managed to break through the resistance in the 1.1862 area, leaving the door open for the dollar to rally. This occurred punctually. Now after the bad weekly closing for the euro against the dollar and now risks collapse.
What triggered the dollar’s strength was a US government report which showed that jobs grew more than expected in July. As a result bond yields were pushed higher and added further arguments for faster US monetary tightening.
On August 6, the euro closed at 1.1762, down 0.60% from the previous session. The week, however, ended with a decline of 0.91%. Such a decline had not been seen since mid-June 2021.
As we were saying, the euro’s attempt at redemption fell on the resistance in the 1.1862 euro area, so now the quotations are heading towards the I price target in the 1.1618 area. A weekly close below this level would open the door to a further bearish acceleration towards the targets shown in the figure. Note that the maximum extension is near the euro-dollar parity.
The bullish could return to take command of the trend only in the event of a weekly close above 1.1862.
Also on the monthly time frame the redde rationem is approaching. As can be seen from the chart, in fact, a monthly close below 1.162 would trigger a bearish projection that has its first price objective in the 1.04 area, very close to the maximum bearish extension on the weekly.
The EUR/USD is slowing further in recent hours and broke support at 1.1850 last night to contract near 1.1830.
By moving close to that level, the EUR/USD may now attempt to test major support at 1.18 with the risk of a fairly large fall.
The EUR/USD dropped to its lowest level in a week below 1.1840 last night, largely due to higher US 10-year bond yields at 1.21%.
The closest support level, should the EUR/USD finally break away from the 1.1840 mark, would be 1.1805.
Next, the Fiber could try to test the intermediate support of 1.1750 and, in case of break-out, sink even up to 1.1730.
The last support threshold would be represented by the relative minimum of 1.1680.
To enable a bullish rally, it would instead be necessary, first, to overcome the level of 1.19 which is still very close to the 200-day and 50-day averages.
Before this value, however, the Fiber will have to face the first resistance level of 1.1880.
In this regard, looking at the latest movements of the EUR/USD, it is not excluded that the achievement of this last value could coincide with a new consolidation phase below the level of 1.19. In fact, approaching this target in the short term could lead to a new consolidation phase.
Indeed, approaching this short-term target seems increasingly difficult, considering that even the positive data coming from the Eurozone last week and this week are not convincing investors, who are still fearful of increased contagions from Delta variant.
As for the main market movers, watch out in the second half of the week for data on unemployment claims and especially the US trade balance, which will certainly affect the EUR/USD.