Stays below retracement level
The EURUSD had an up and down day on Monday. Although the day is up from Friday's close, the inability to crack topside resistance, and the fall back below a key level, sends the pair into the new trading day with more of a bearish bias.
The high on Monday peaked near the high from Thursday, and the 38.2% retracement of the move down from Thursday's high to the low trading today. Later, when the price fell below the 1.1209 level, it increased the selling momentum. This key level corresponds with the 61.8% retracement of the EURUSDs all time trading range since it's introduction as the common currency (2000 year low to the 2008 year high). The price stayed below that level - once it was broken - and as a result, it will be close resistance for shorts in the new trading day.
The range for the day was a modest 81 pips.
Into the new trading day and going forward
Going forward, staying below the 1.1209 level will keep the sellers in more control in the short term. That is the close resistance. Shorts will will also be eyeing the 1.12423 level (38.2%) and the 1.1260-79 level (see yellow area). This area represents a number of swing lows that created the floor in February. As long as the price remains below the 1.1260-79 level this week, I think the sellers would be ok with any correction. Any move above that area, however, and they are likely to become less patient with the downside potential. I would expect stops being triggered, and a shift to a more bullish bias.
On the downside, support targets come in at trend lines off the hourly chart at 1.1168, and below that at 1.1131 currently. Those trend lines are downward sloping so as time goes by, they get lower and lower. The low price for 2015 comes in at 1.10972. Watch for traders to lean against the lower trend line if the momentum to the downside is to continue into the far east session.
For the week, the ECB will announce no change in policy on Thursday. ECB Draghi is likely to talk about the QE program which has yet to begin but is expected to be started soon. I would guess he would be positive about the potential impact.
On Friday, the all important US employment report will be released. The last report surprised the market with an above consensus 257K new jobs along with a large revision to prior months.
Since then, the US data has been more weak and not conforming to what the employment data suggested about the economy.
For this month, weather has the potential to impact. The expectations for this month is for 235,000 new jobs. A year ago the expectations in January and again in February were high-ish at 197K and 180K. The actual numbers came in at 74K and 113K. Is there a weather surprise ahead? The Employment component in the ISM fell to 51.4 the lowest levels since June 2013 today. We will get ADP and initial claims on Wednesday and Thursday. You get the feeling that the market is looking for that month, where job growth won't be so strong and where revisions will not be positive, but negative.
As a result, I would expect that even if the price can keep below the aforementioned resistance levels, the downside will have a tough getting below the lower trend lines. Look for support buyers on dips.
