by: Bastian Rubben
The investors are waiting for the flow of employment data that starts today and ends on Friday with the unemployment rate. The US stock markets are facing a rare situation in which they are locked between a narrow channel and a break-down or a break-up of this channel will penetrate to one of the gaps that are opened above and below the channel. If the stocks rise then the USD might lose some of its power, but if they eventually fall, the USD will resume to its bullish momentum.
The Euro, which is usually influenced by the US stock market (positive correlation), cannot rise this time, in spite the fact the futures are up. The reason for that are obviously the huge debt problems of the PIIGS countries that caused the investors to lose their faith in the EUR.
The pair EUR/USD is oversold, according to directional indicators, such as the stochastic oscillator. The meaning of this indication is that the correction up might not be over yet, so it would not be surprise if the short-squeeze lasts up to 1.35. However, if the declines continue from these points, we will see the inverted "cup &handle" pattern in the daily chart of the pair, above the support of 1.315, and a break-down there might trigger another sharp bearish session downwards to 1.285.
In the 1h chart, there is an opened gap that was created on Monday, which might disturb the EUR attempt to correct. The closing levels of the gap are around 1.324, though the Euro is now getting far from this point.
