EUR/USD: Bullish but cautious ahead of non-farm payrolls
The EUR/USD posted on Thursday its highest close since late February at 1.3239 after the European Central Bank's (ECB) uneventful monetary policy meeting and ahead of the widely anticipated US monthly jobs report.
The shared currency gained 147 pips and performed an impressive rally, breaking well above the 1.3200 resistance level that has now turned into support.
Inaction by the ECB and Bank of England, while mostly expected by the market, acted as a catalyst of such a EUR/USD performance. The fact that Mario Draghi's tone was not as dovish as expected helped boost the euro.
According to Analysts at Unicredit, the ECB will probably keep with this similar tone over the coming months amid growing signs of economic stabilisation and rising confidence that the EMU economy "should recover in the course of the year, albeit at a subdued pace".
However, as some experts noted, the market has been even stronger than they anticipated with the EUR/USD showing only a little corrective pressure. Carol Harmer, at Charmer Charts, believes that we may well dip to the Daily Pivot of 1.3208.
"This ties in with 1.3200 support and also 1.3199 the short term 50% Fib level, so this area is looking quite good support, especially as the 60 and 240 min charts are not overbought," Harmer said.
"The dailies have entered overbought area, but as yet these are not turning bearish. Thus until we see a turn, we would be safer buying into weakness."
Karen Jones, Head of FICC Technical Analysis Research at Commerzbank AG, is not optimistic either in the long term bearish view. "Above 1.3340 lies 1.3462/68, the 200 week ma and the 2011-2013 resistance line, we look for this to hold and provoke failure."