EUR/USD to 1.05?

EUR/USD to 1.05?

EUR/USD to 1.05?

EUR/USD broke through its 1.08 support level to trade at its lowest level since April 2015. Today’s move was driven by the growing divergence between Eurozone and U.S. monetary policy. The ECB is poised to increase stimulus the same month that the Fed is expected to increase interest rates for the first time in 9 years. The rush from NFP will be felt for some time as investors place their bets for December liftoff. Fed fund futures went from pricing a 56% chance of a rate hike next month pre-NFP to more than 72% chance after today’s report. Not only did job growth exceed expectations by 86k but at 271k, this was the strongest monthly increase in payrolls this year. The unemployment rate also dropped to 5%, the lowest level since 2008 while average hourly earnings rose 0.4%, the largest increase since July 2009. This unambiguously positive U.S. report gives the Fed the green light to raise interest rates in December and from now until then the path of least resistance for the dollar will be higher. Unless ECB officials start backing away from their call for more stimulus EUR/USD could test 1.05 in the coming weeks as traders position for easing from the ECB and tightening from the Fed. So if you are looking to ride the NFP rush further, selling EUR/USD on any bounce could be a smart trade.

There are no significant Fibonacci or moving average support below current levels so the main levels to focus on are some spike lows near 1.0660 and then 1.05.

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