The euro is still reeling following Friday’s non-farm payrolls data that surprised to the upside and bolstered the argument for the Federal Reserve to raise interest rates in December. The creation of 271,000 jobs in October surpassed the forecast of 181,000. Yesterday the bearish slide continued and tentatively broke below 1.07 handle and made fresh 7-month lows.
On the other side of the Atlantic, European leaders anticipate making a decision on Monday for the €2 billion Greece bailout payment. The Eurogroup will continue to press Greece to implement agreed reforms. The Portuguese government of Prime Minister Pedro Passos Coelho lost a no-confidence vote to a coalition of the Socialist Party ,the Greens, the Communist Party and several smaller leftist parties in what was the shortest lived government in over 40 years. Mr Coelho was re-elected with a minority government on October 4th. Both austerity themes, could weigh heavily on the euro.
The EUR/USD weekly chart is displaying the strong bearish trend that has been in place since the May 2014 high of 1.3392. If bearish momentum continues, initial support could come at the noted 2015 low of 1.0461. Further pressure may eventually target the 127.2% Fibonacci level of the spring to summer rally. Deeper support may target the parity level and a daily close below that level could open the door to 0.9688 area.
If Federal Reserve officials complain about the recent strength of the US dollar, weaker exports and lower inflation, we could see price tentatively rebound towards the 200-day SMA, which currently trades around 1.1093.
The trade: Sell EUR/USD at 1.10760, with a stop loss at 1.0860 and take profit at 1.10465. The risk/reward ratio is around 1:3