The NFP day is here, and the EURUSD still hovers around the highs. It made a new high for the year and was quickly rejected to the 1.18 area. Indecision is the name of the game, as investors wait for the final piece of economic data before the weekend.
The grind higher in the EURUSD pair is more than strange. According to the Elliott Waves Theory, the pair completed a five-wave structure yesterday, after spending most of its time in a running correction for the second wave.
Weak Labor Data So Far This Week
During the NFP week, investors focus on pieces of economic information that may offer a clue about what the NFP will show. More precisely, the employment component in the ISM Manufacturing and Non-Manufacturing and the ADP releases are of extreme importance.
All three showed a contracting labor market, putting pressure on the EURUSD on ever attempt to move lower. Therefore, we can say that this is USD story rather than a EUR one. Moreover, considering that the same reaction is seen on other USD pairs, the EURUSD is not the only pair trading with a bid tone.
EURUSD Impulsive Wave
The bullish impulsive wave started by the time the EURUSD pair broke higher from a triangular formation. Moreover, after it broke, it retested the b-d trendline – a typical move following a non-limiting triangle.
Elliott defines a running correction in a bullish trend as one that ends above the start of the corrective wave. Almost always, it forms as the second wave in strong impulsive moves – just like the EURUSD did here.
The danger in trading a running correction is that it may still be in progress. Because of its magnitude, the last waves in the five-wave structure are small and difficult to see.
Therefore, any short trade needs a stop-loss in the 1.1950-1.20 area and a take profit below 1.15. As for the entry, just make sure it comes ahead of the NFP, as that is the piece of economic data that the market waited for all week.