Daily Market Recap – EURUSD consolidates in a pennant while waiting for the PMI and the NFP

The EURUSD is consolidating in the short term after rising to a one-month high last week thanks to Jerome Powell's dovish tone.

Indeed, the single currency benefited from the Fed Chairman's comments that the labor market has a long way to go before the time comes to withdraw support measures (tapering).

These statements pushed back expectations of a Fed tapering. While some had anticipated a withdrawal of support early in the fourth quarter, the tapering could instead begin in December or even early next year.

In reality, the withdrawal of support will depend on the recovery of the job market, as the Fed Chairman has indicated on multiple occasions since the beginning of the year. The better the employment numbers, the greater the chances of an early withdrawal of support by the Fed.

The next major catalyst is therefore the monthly employment report that will be released on Friday. The consensus forecast is for 880,000 new jobs and an unemployment rate (U3) down to 5.7%.

As we await the release of this report on Friday, market participants will be watching the final readings of the services and composite PMIs in Asia, Europe, and the US on Wednesday.

From a technical perspective, the EURUSD has been trending upwards since it broke out of its range last week, but we can see the exchange rate consolidating in a short-term “pennant”.

(Chart Source: Tradingview 03.08.2021)

In theory, the EURUSD should break out of the pennant at the top, but this should depend on the aforementioned releases. A breakout from the top of the pennant and Bollinger Bands would suggest a continuation of the rebound to $1.20, while a breakout from the bottom would open the way for a pullback in the EUR/US to the upper bound of its former range at $1.1825.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.