Last Friday’s ECB statements which focused on the inability of the market to understand its intentions with regard to the central banks communication debacle on Thursday seemed to have some lasting impact. EUR/USD extended Friday’s correction, making a low of 1.0803. That marked a 1.6% decline from Friday’s peak, though this still left the euro just over 2% up on levels seen ahead of the ECB announcement.
Friday’s stronger than expected U.S. payroll report is pushing U.S. yields higher relative to European yields which should continue to help the dollar regain its strength over the European currency. The yield differential is printing a reading of 1.25, after being as low at 1.12 on Wednesday and as high at 1.28 on Friday.
Target support is seen near the 20-day moving average at 1.0697. Resistance is seen near Thursday’s highs at 1.0981. Price action is forming a bull flag pattern which is a pause that refreshes after a breakout. Momentum on the currency pair is positive, as the MACD (moving average convergence divergence) index is positive as it prints in positive territory with an upward sloping trajectory. The relative strength index (RSI) edged lower back into the middle of the neutral range as the pause in price action is reflected by consolidation.
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