For the majority of the summer, I have maintained a bearish stance on euro dollar. The disappointment however with the lack of clarity on how much money the ECB will pump into the economy helped the euro rebound yesterday. After making a low at 1.2570 on the last day of September, EUR/USD stabilized but was unable to rally above 1.2700.
That key low was taken out after today’s NFP report. Labor market conditions to continue to improve as 248,000 jobs were added in September and August jobs were revised higher to 180,000 from 140,200 jobs. July was also revised 31,000 jobs higher to 243,000. The unemployment rate fell to 5.9%, the lowest level since July 2008. A big negative however remains the low participation rate which is at a multi-decade low at 62.7%
Price is still trading excessively below the 200-, 100-, and 50-weekly Simple Moving Averages (SMA). The next key downward support level of 1.2458 comes from the 78.6% Fibonacci retracement of the 1.2041 to 1.3992 move. Deeper support may target the 1.20 handle. Rallies will be faded and the next major leg down for the euro may not occur until we get more news from the ECB on their easing measures.
The trade: Buy EURUSD at 1.2458 with a stop loss at 1.2398 and a take profit at 1.2590. The Risk/Reward Ratio is almost 1:2
Edward J. Moya
WorldWideMarkets Online Trading