Euro-Cliff Or NFP Miracle?

 |  Includes: FXE, UDN, UUP
by: FXstreet

Euro bulls took another hit yesterday after the FOMC minutes showed an unusual hawkish tone, hinting the likeliness that the ongoing quantitative easing could well be halted or slowed down before year-end, as many of the Committee members have suggested. This leaves no doubts that the U.S. economy is expected to strengthen during the present year, supporting the outlook of a bullish greenback for upcoming periods.

… NFP would be the judge

The EUR/USD remains practically in autopilot in the vicinity of the psychological level at 1.3000 so far, trading in an unusual narrow range, ahead of the results out of the U.S. labour market data.

Although the recent discrepancies between the ADP report and the more relevant NFP have led investors to avoid making projections on the latter in light of the private sector's job creation, traders could not help to speculate on the same shocking result in today's NFP reading, specially after Thursday's +215K raise in the ADP report. Prior surveys expect the U.S. economy to add 150K jobs during the month of December and the jobless rate to stay put at 7.7% in the same period. Therefore, it seems fair to infer that a print at the median or any surprise above it could well be supportive of risk appetite, in which case the single currency would be benefited. However, the same result might be a two-edged sword that should be very carefully taken into account by euro traders: if December's NFP exceeds expectations then the market is moving in the direction of the last FOMC minutes, indicative as well of better prospects for the US economy growth… and backing USD strength.

When comes to technical studies, and assessing the recent EUR/USD price action, analyst Karen Jones at Commerzbank comments, "Intraday rallies should now find resistance at 1.3158/93 and we suspect will remain capped by 1.3310. This will leave attention on the 1.2930 2012-2013 uptrend. We note the divergence of the weekly RSI and we continue to suspect that the market has topped, a close below the 1.2930 uptrend is needed to confirm".

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.