Last week was a rollercoaster ride for the EURUSD currency pair. It jumped sharply higher after the Fed meeting as the FOMC and chairman Powell delivered a stronger than expected dovish message.
However, the rally was rejected at the 1.1500 level and then the decline continued after the strong US data on Friday. The market was positioned against the Dollar and that coupled with the stronger than expected surprise in the Non-Farm Payrolls data, suggests that USD could continue to strengthen this week as traders reverse their short USD positions.
New data about the EU economy will be released this week, and chances are if the slowdown continues, it should further pressure the Euro to the downside, and especially EURUSD considering the strength in the US economy.
Overall, the 1.1300 - 1.1500 range in EURUSD remains intact, so we are trying to take on a short-term opportunity of the market potentially reversing positions after the storm has (the pivotal events of the last week have) passed.
Additionally, the technical picture is now favorable for more bearish price action as EURUSD just completed an inverted head and shoulders bearish pattern which points to a target of 1.1360.
If things progress, as described and EU data remains weak or surprises to the downside, then this target should be easily reachable and could be overshoot also. However, given the market bias to dislike the US Dollar (due to some long-term factors) we should be ready to manage this trade quickly if things start to reverse.
Hence, the stop loss can be moved to breakeven once/if the trade goes in our favor.
