EUR/USD: Still prefer sell-rally bias in short-term
The market has been buying EUR across the board for the entire week, with the single currency making solid gains against the AUD, JPY, USD and GBP since Monday; up 2% this week against the JPY, up 2.5% against the AUD, up 1.5% against the USD and up 1% against the GBP. This rally has happened on ‘lack of bad news’ rather than any particular good news. I’m not saying the EUR cannot continue to rise (remembering that long-term positioning is still quite short EUR), but that on the brink of a major event risk, the chances are that some of these gains will be given back before the weekend.
From a technical perspective, EUR/USD is stalling ahead of an important 61.8% retracement level at 1.3030 and there is more important resistance at the double-top neckline at 1.3080. EUR/JPY is also running into Fibo resistance at 102.25. [I see EUR/AUD as a special case in that it has fallen so far so fast and has still a lot of scope for retracement].
I think the danger after the NFP is that we see a flurry of EUR profit taking ahead of the weekend. If this doesn’t happen and we open next week above 1.3100, then we will all need to sit up straight and take very careful notice of this EUR rally.