Will Non-Farm Payrolls Mark a Low in the EUR/USD?

Following the ECB’s unchanged rate decision, and the NFP announcement today, let's see what Matthew Clark predicts for the EUR/USD

Yesterday morning the market waited in anticipation of Super Mario Draghi’s press conference. Following the ECB’s unchanged rate decision the market awaited details on the previously announced Quantitative Easing with the bond purchasing program starting on Monday the 9th of March, as previously leaked last week from an ECB source.

But once again, despite saying that the European Central Bank forecasts assume the EUR/USD exchange rate at 1.14 in 2015, 1.13 in 2016, and 1.13 in 2017, very little new information was offered. He was quite optimistic on the economic outlook for the euro area with higher revisions for growth over the next 2 years, with increases to 1.5% from 1% this year and 1.9% from 1.5% in 2016.

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The EUR/USD jumped to a day’s high at 1.1114 before surrendering its gains falling to fresh 11-years lows after he announced that the European Central Bank was willing to buy negative yielding bonds and that bond yields could fall down to the -0.2% ECB deposit rate.
But with the market today waiting on the Non-Farm payrolls what can we expect for the EUR/USD?

On a fundamental basis the market is looking for 235,000 new jobs to be added in February and a fall in the unemployment rate from 5.7% to 5.6%. Private sector wage growth will also be under scrutiny which was weaker than expected towards the end of last year, any rise should give the dollar a boost. But expectations are for a fall to 0.2 from 0.5 month-on-month, so look out for revisions lower from the previous month as it would see the dollar sell off.

Euro120
Source: Bloomberg Charts

 

Looking at the chart above, we can see on a technical basis that we broke the wave (4) triangle that developed from the 23rd of January to the 26th of February. This has set us up for the final push lower in a wave (5).

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Euro 15
Source: Bloomberg Charts

 

 

On the short-term chart we have broken down the wave count and should now look for 5 waves lower from yesterday’s Super Mario inspired spike. Obviously before Non-Farm payrolls, even if we see a lower EUR/USD we cannot guarantee that the wave 5 will be the end with the possibility of it being a wave 1 of wave 5, but any print above the 1.1220 level will confirm that a low in the euro is in place and the multi-week, multi-month correction is finally underway.

 

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