EUR/USD: Uptrend Still Intact

 | Sep 04, 2017 06:38AM ET

The U.S. employment report on Friday disappointed but the U.S. dollar performed quite resiliently following the weaker-than-expected payrolls numbers. The greenback initially plunged but losses were quickly erased as investors hope that Federal Reserve officials could still support a year-end rate hike. The chances of a rate rise in December are currently at about 40 percent. Several Fed officials will be speaking throughout this week and may provide direction to the dollar.

EUR/USD traded off its highs and inched down to 1.1850. With U.S. markets being closed today for the Labor Day holiday, trading conditions could be thin at the beginning of this week. Main attention will be paid to the European Central Bank meeting on Thursday. Recently, there has been speculation that the ECB may not announce a decision on reducing its asset-purchase program at this meeting. ECB policy makers may delay the announcement of big changes to QE until October or December because of the euro’s strength. We will get further clarification on Thursday and until then we may see EUR/USD trading somewhat lower.

For the time being, the euro’s uptrend is still intact with EUR/USD remaining above important trend lines. If the pair falls below 1.1840 we will focus on a lower target near 1.1770. A more meaningful support is however seen at 1.17 while the bias would then shift from bullish to neutral. For the euro to rally, bulls would need to push the single currency back above 1.20. A higher target could be at 1.21.