By Raghee Horner, Chief Currency Analyst
This Friday’s Non-Farm Payroll (NFP) countdown has begun with today’s ADP (Automatic Data Processing) Non-Farm Employment Change release at 8:15am EST. It is widely considered the kick-off to the prognosticating and congestion that will occur as traders await the big Friday number. Identifying the range of the congestion across shorter term intraday charts like the 15, 30, and 60 minute chart is an effective way to attempt to identify the market psychology and therefore the market cycle in order to analyze the price action between now and 8:30am EST Friday morning.
Let’s take a closer look at the 60 minute EUR/USD as the Greek Austerity plan and U.S. Dollar Index support at 80.20 should be a factor throughout the morning session.
The current market cycle on the 60 minute chart is in a mark up or uptrend as the 34ema Wave is showing near term strength. The issue is not the strength but rather the ceiling that is waiting as the EUR/USD seems stuck within a larger range. The range is currently 1.3655 to 1.3670 to the upside and 1.3433 to 1.3455 to the downside. This leaves an over 230 pip range on the EUR/USD between the floor and ceiling and enough range to continue to encourage fading at the exhaustion highs and lows of the range as can be seen since February 19th. This will likely be the case until Friday’s NFP.
The Greek Austerity plan is the wildcard however. With early reports indicating that Germany is not on board this, in my experience, will likely keep the EUR/USD within the range and not let prices breakout higher as positive news of a bailout for Greece was widely expected to create. The highs of the range in my opinion are most likely indicative of the positive discounting of good news out of Europe. The price to watch will be the range high at 1.3670.
The other factor keeping the EUR/USD in check is the support near and at 80.00 on the U.S. Dollar Index (traded on the ICE). The contract has been bouncing from the 80.08 to 80.21 and I believe this further confirms the ceiling seen intraday on the EUR/USD.
If there is to be a fade off the ceiling this morning look to the rising wedge pattern on the 60 minute chart. The mark up cycle confirms that there is a trend on this time frame and therefore the correct environment for a trending pattern such as a wedge. There are two support levels to watch as both the uptrend line of the pattern and the 34ema high are converging at 1.3620. The 1.3620 is a minor psychological number and just adds more support and relevance to this price level.
EUR/USD 60 minute chart with the PRS plug in
EUR/USD 60 minute chart with the MACD Traditional plug in
The short term momentum is starting to shift as can be seen with the subtle shift in the MACD (Traditional) Histogram. Since there is a trending characteristic to this time frame, a Stochastic would not be the ideal indicator to use in this situation. The MACD Histogram is currently dipping below the “0” line as the 12 period Exponential Moving Average (EMA) is crossing below the 26 period EMA. I believe this is confirmation of the weakness as bulls are being overcome by selling pressure from the bears.
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*Note: As with all major economic releases there could be significant price volatility with this announcement. Currency spreads will typically widen just before the release and will remain wide for a few minutes after. If the announcement is a shock to the consensus estimate, the price of the currency pair could gap significantly. For example, the price on the EURUSD trading at 1.2820 - 1.2822 just before release could gap up 60 pips to 1.2880 - 1.2882, without any available prices available between the price of 1.2820 and 1.2882. A Buy Stop placed before the announcement at 1.2830 would turn into a Market Order and would be filled at the prevailing price 1.2882. The same would be true with a Sell Stop.
Basically, plan on the spreads widening and if you are trading with a Buy or a Sell Stop entry order, do not anticipate being filled at your entry price. You will be filled at the prevailing market price after the release, and this market price could be significantly different from your desired price of your entry order.
EUR/USD 60 minute chart with the Wave indicator and GRaB plug-in