EUR/USD Forecast: Euro Drops as Strong US Jobs Data Sends Yields Higher

• The euro did initially try to rally on Friday, breaking above the 200-day EMA, but it got absolutely crushed as the jobs report in the United States came out much hotter than anticipated.

• In fact, we came out almost double what was expected, and that of course had interest rates in the United States climbing pretty significantly.

This is a market that has been in a longer-term range. Until recently, we had tightened up right around the 200-day EMA, and we have clearly broken out of that range that we were in just a few hours ago. So, by doing so, it looks like we're probably going to head towards the 1.1450 region, maybe even 1.14. I don't necessarily think we break down through there, but if we did break down below 1.14, that could send this market down to 1.1050 before it's all said and done.

Market Outlook and Potential Rebound

What I actually believe is this initial reaction might see a little bit of pushback. Now, I don't know if this is Monday that we'll see this, but in the next day or two I would anticipate the bottom of this range holding, so it may offer a nice short-term buying opportunity, just a simple range bound trade. If you ever look at longer-term charts of the euro against the US dollar, it spends most of its time doing exactly that, just sideways trading.

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With this, if you're already short, then you're in good shape. And if you're not in the market right now, you're looking for somewhere around 1.1450 for some type of reaction in the form of a bounce. You also want to see the 10-year yield in the United States start to turn lower, which it very well could.

This reaction was directly to the jobs report and then of course when you head into the weekend, most people don't want to take a bunch of risks. So, a little bit of a move to the downside, but really when you look at it through the prism of the totality of it, you're really only looking at maybe an 80-pip swing or so.

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