The Daily Forex

Forex Mid-Day Technical Report

EUR/USD at New Record High on Carry Trade After Strong NFP

Initial reaction to the much stronger than expected Non-Farm Payroll report is like what’s discussed before, carry trade dominates. Even though dollar is sent higher against the Japanese yen, resumption of carry trade activities, on anticipate of rally in US stock market, sends most yen crosses higher, which in turn overdone dollar’s strength. As a result, EUR/USD is lifted to new record high above 1.45 level again while other majors strengthens too. In Oct, US economy added 166k jobs, almost a double of expectation of 88k. Though, prior month’s job growth was revised lower from 110k to 96k. Unemployment rate remained unchanged at 4.7%.

USD/CAD dived to new multi-decade low right after release of much stronger than expected job report. Canadian economy added 63k jobs in Oct, much high than expectation of 12k. Unemployment rate dropped to new 33 years low of 5.8% vs expectation of 5.9%. The data reinforces the view that BoC is firmly on hold with no room for an early rate cut yet.

Swiss Franc continues to trend higher against dollar today on the back of stronger than expected inflation data from Switzerland. CPI accelerated to 1.3% yoy, above expectation of 1.2%, hitting a 14 month high. SNB Roth has emphasized last week that it’s not correct to assume SNB is on hold. Today’s data prompted speculation that SNB will hike again in near term.

Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.

EUR/USD

Daily Pivots: (S1) 1.4390; (P) 1.4438; (R1) 1.4473; More

EUR/USD’s rally resumes to new record high of 1.4525 in early US session. However, with key medium term resistance of 1.4535 cluster resistance (95 high and 200% projection of 1.3262 to 1.3851 from 1.3360 at 1.4538) in proximity, as well as mild bearish divergence condition in 4 hours MACD, short term outlook remain neutral. A short term top could be around the corner. Sustained trading above 1.4535 cluster resistance is needed to confirm recent rally has resumed. On the downside, Break of 1.4402 support will confirm that an intraday top is in place and bring deeper decline towards 1.4124 support. Break will indicate that the whole rise from 1.3360 has likely completed too and bring deeper fall to 1.4014 support and below.

In the bigger picture, with medium term rising channel (support at 1.3611) remains intact, up trend from 1.1639 remains in force. Also, regardless of internal structure, such rise is treated as resumption of the long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and is expected to extend to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 which will overlap with 1.5 psychological resistance.

On the downside, below 1.4124 will warn that a short term top is in place and bring deeper correction. But a break below the mentioned medium term trend line is needed to be the first alert to indicate that such rally from 1.1639 has completed. Otherwise, medium term outlook remains bullish.

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