Double Bottom on EURUSD: Bulls Ready to Rally on NFP?

EURUSD traded steadily higher yesterday as forex traders squared their positions ahead of the highly-anticipated Non-Farm Payrolls (NFP) report. The currency pair opened at 1.1076 and closed at 1.1103.

Third-Tier Data from the Three Largest Economies in the Euro Zone

Only third-tier data are scheduled for release from the euro zone today. We kick things off at 7:00 am GMT with German industrial production for October. The forecast is for an uptick of 0.1% to follow the 0.6% decline in September. Then at 7:45 am GMT, France’s trade balance is eyed to show a 4.8 billion EUR trade deficit for October. Then at 9:00 am GMT, Italian retail sales is expected to show that consumer spending grew by 0.5% in October.

Highly-Anticipated Employment Figures from the US

Meanwhile, big reports are scheduled for release from the US today. At 1:30 pm GMT, the NFP report for November is eyed to show that 187,000 jobs were added during the month. This follows after the 128,000 reading for October. Along with it, the unemployment rate for the month is expected to have remained steady at 3.6. Average hourly earnings is also expected to post an improvement from October. The forecast is for a 0.3% uptick which is slightly higher than the 0.2% reading for the previous month.

Federal Reserve’s Optimism to be Tested

These numbers will be closely watched by market participants later today. This is because the Federal Reserve has expressed its optimism on the labor market. In fact, they did not cut rates for a fourth time this year because they see resiliency in the US labor market. Disappointing figures could be bearish for the US dollar as they would raise concerns about the Fed’s current stance on monetary policy.

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EURUSD Outlook

On the 4-hour time frame, we can see that EURUSD is trading above the neck line resistance of the double bottom chart pattern. Remember that in forex trading this is considered as a bullish indicator. The market bouncing off support at 1.1000 is taken as a sign that there are enough buyers in the market to keep EURUSD from falling below the psychological handle.

If there are enough bulls to fuel the rally on the currency pair, the next resistance level in sight is the highs for October around 1.1170. Negative NFP numbers from the US may just push EURUSD higher.

On the other hand, better-than-expected labor figures may cause the currency pair to slide. EURUSD may begin to trade lower and test its November lows around 1.0990.

ratio for a fresh long position is poor. However, if the price corrects 50% of the rally from the August 2, and thereby reaches 1461 level, the risk-reward ratio will improve to 2.54 times the risk.Download our latest quarterly market outlook for our longer-term trade ideas.

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