EUR/USD Forex Signal: Rectangle Formation Ahead of NFPs

Crispus Nyaga

The pair will likely remain inside this channel today as investors wait for the first NFP data of the year.

Bullish View

  • Buy the EUR/USD pair and add a take-profit at 1.1400.

  • Add a stop-loss at 1.1300.

  • Timeline: 1-2 days.

Bearish View

  • Set a sell-stop at 1.1300 and a take-profit at 1.1200.

  • Add a stop-loss at 1.1400.

The EUR/USD held steady even as an energy crisis in the European Union continued. The pair rose to 1.1345, which was the highest level since Tuesday this week. It has risen by about 0.63% from its lowest level this week.

Europe Energy Crisis

European countries are going through a major energy crisis as gas prices jump. Average gas prices rose by more than 5% on Wednesday after rising by 10% on Monday and Tuesday.

The surge in gas prices is mostly because of Russia, which has lowered the amount of gas that it ships in the European Union. Gas flows between Russia and Ukraine have been below normal this week.

Also, the recent tensions between Russia and western countries have pushed the former to use gas as leverage. Most importantly, Russia is concerned about a delay in approving the Nordstream 2 project.

As a result, many power companies in Europe are struggling. On Wednesday, RWE, a leading German energy producer said that it had been affected by the volatility. Uniper managed to raise $11.3 billion from its parent company.

The rising energy prices, coupled with the rising number of Omicron cases mean that the bloc will have a slower recovery than other places. As a result, the European Central Bank (ECB) will find it difficult to increase interest rates. Analysts expect the bank to continue with its asset purchases program this year.

The EUR/USD pair also rose after the strong US jobs data. According to ADP, the US economy added about 800k jobs in December after adding 505k in the previous month. These numbers came two days ahead of the official non-farm payrolls (NFP) data.

Later today, the pair will react to the latest US initial jobless claims numbers and the ISM non-manufacturing PMI data.

EUR/USD Forecast

The EUR/USD pair tilted higher after the latest FOMC minutes. It is trading at 1.1345, which is slightly above the 25-day moving average. It has also risen above the 23.6% Fibonacci retracement level while the MACD has moved above the neutral level.

The pair is still between the horizontal channel that started forming on December 1. It has moved above the ascending trend line that is shown in red and the support at 1.1270.

Therefore, the pair will likely remain inside this channel today as investors wait for the first NFP data of the year.

EUR/USD

Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

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