EUR/USD: Eyes resistance at 1.1430, At risk of hourly upcycle

Cycles & Levels: Today’s US NFP will determine whether or not buyers can find enough follow through to revert this week’s losses and in a positive note. If that’s the case, it will fortify the prospects of the new developing weekly range between 1.13 and 1.18. The daily continues in a down-cycle and is now headed straight into 1.1430 resistance (blue line), where the line-up of firm offers may prevent further progress ahead of the US NFP. A break above sees 1.1460-80 area as another major resistance based on the intersection of the 50% fib retrac from the latest daily cycle-down and the 3rd touch of a trendline (see circle). A break and close above would be a major concern for the outlook of the downtrend, but it won’t be until we find an acceptance above 1.1540/50 that this market may start to transition into a daily range as opposed to the current down-cycle. On the hourly, Thursday’s auction higher has negated the down-cycle and it looks like we are either establishing a 1.13-1.1420/30 range or we might be developing a new up-cycle upon the break and consolidation above 1.1430, which is the next key level. The latest order flow in the hourly is encouraging for the interest of buyers. The impulsive & steep move up comes in stark contrast to the compressive (two-way business) on the way down.

Correlations & Volumes: We’ve seen the formation of a P-shape volume structure, in other words, most of the volume in the last 24h of trading has been accumulated to the topside. Subject to the US NFP outcome, this is an auction structure that typically raises the prospects of finding opportunities to buy dips as it communicates that the value is shifting to higher levels. This type of sizeable candle and structure can easily overrule other elements that may argue against much higher levels, such as the fairly stagnant German vs US yield spreads or the Italian yield premium. In the next 24h, the risks are building up for buyers to keep control on very much a sentiment play unless flows are distorted by an outlier US NFP release.