The euro might have recently surpassed expectations as it broke through the recent support levels following the slide in the US Unemployment Rate. Subsequently, the question remains as to whether the pair can continue to rally on ongoing weakness in the dollar’s sentiment.
The pair experienced an extremely bullish week as the pair rallied following a collapse in US dollar sentiment. The sentiment swing was largely due to a disappointing US Unemployment Claims result which rose to 276k coupled with the Unemployment Rate also increasing to 5.0%. Subsequently, the upside for the euro beckoned, and the pair rallied steadily to finish the week around the 1.1388 mark. Additionally, helping the push was a stronger than expected EU CPI Flash Estimate result which rose from -0.2% to -0.1% m/m.
Looking ahead, the euro is likely in for another busy week as the EU Retail Sales and US ISM Non-Manufacturing PMI results fall due. The US ISM Non-Manufacturing PMI is expected to lift from 53.4 to 54.0, but the upside is likely limited for the dollar. Additionally, expect plenty of volatility as both ECB President Draghi and Fed Chair Yellen are due to speak and are likely to attempt the typical expectation setting exercise. Subsequently, expect the Euro to remain in play throughout the week as those data points hit the news wires.
From a technical perspective, the pair remains strongly bullish with the key 1.15 handle still in focus. However, Friday’s candle was largely neutral despite the strong swings, and the RSI oscillator has just touched upon over-sold territory. Subsequently, there is mounting risk of a small corrective pull back before the pair recommences the challenge to the 1.15 level. Ultimately, our bias remains bullish but with a strong caveat to watch for a pullback to the 1.13 level.Support is currently in place for the pair at 1.1148, 1.1051, and 1.0826. Resistance exists on the upside at 1.1442, 1.1494, and 1.1713.
Ultimately, the pair’s trend direction is largely expected to remain in place in the week ahead. However, expect to see plenty of volatility around the release of the EU Retail Sales figures as a poor result could put the euro under pressure.