The US dollar gained after the Fed’s last meeting, but the gains were partially offset in the week that followed. However, the bounce from the lows remains insignificant for the EUR/USD pair, as the consolidation resembles a bearish flag formation.
Such a pattern might have horizontal consolidation or one that goes against the underlying trend. The underlying trend, in this case, is bearish, and the measured move equals the drop from 1.21 projected from the lower edge of the consolidation area. In short, it suggests a move to 1.17, and the only thing that comes to mind is a better than expected NFP report next Friday.
The Fed has a dual mandate – one part deals with price stability and the other one with job creation. While inflation appears to have risen above the Fed’s target, job creation stalled. Any improvements revealed by the upcoming NFP report should send the US dollar higher, and thus the EUR/USD pair lower.
Bears may want to wait for the market to close below 1.19 before going short with a stop at 1.1980 and a take profit at 1.17 and beyond or set by using a risk-reward ratio bigger than 1:3.
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