EUR/USD continues to be schizophrenic in its behavior. The Non-Farm Payroll number came out on Friday, and suddenly we have a complete rethink of the entire situation in this pair. What was once a straight forward analysis of “Europe bad, USA good” has suddenly become a question of whether or not the entire globe is slowing down.
The dismal report stated that only 69 thousand jobs had been added in the month of May. The months of March and April had been revised downward as well, shedding another 49 thousand jobs between the two. In this scenario, it shows that employers in the US aren’t as confident as the trading community thought. The question then becomes whether or not the US has the ability to drag itself out of the slow growth scenario it is currently in.
The low number also has a lot of traders suggesting that the Federal Reserve could be easing soon. It’s almost a foregone conclusion that the European Central Bank is going to, and this was part of what was weighing on this pair to begin with. But with a chance of the US doing it, a bit of rebalancing is necessary. However, any talk of easing is probably a bit premature. Besides, all things being equal – is it safer to park money Europe or the US?
The 1.25 level was the site of the latest breakdown in this pair. The impressive reversal candle on Friday would have been influenced by a short covering rally and the certain percentage of traders that will choose to close out their positions for the weekend. In the situation that we find ourselves in, a surprise announcement over the weekend could rock the markets, and there is a certain amount of the trading community that has no real stomach for that kind of action.
However, the 1.25 level hasn’t been retested, and it looks like that may be the next move. However, I will simply wait for a sign of weakness from which to sell this pair. The drama in Europe is far from over, and there are no real signs of progress at this point in time.