EURUSD Analysis 5th May 2012 – Triangle Pattern Support Under Pressure
- The euro/dollar currency pair has closed on Friday at key range support lows after a drop of 1.15% was seen on the weekly basis. Volatility is still low at 203 pips which is 71% of the 26 week average of 284 pips.
- Friday had a daily range of 91% of ADR and a drop of .53% following the Nonfarm payrolls report (follow link for latest employment statistics) showing that the US economy added 115,000 non-farm private sector jobs during April. The unemployment rate had fallen to 8.1% from 8.2% the previous month.
- COT Report – EUR FX (CME) bearish wagers had decreased from 113,367 net short contracts on the 24th April to 106,990 on the 1st May. This does not however capture the bearish sentiment seen from Wednesday onwards as the EURUSD dropped lower.
- There is a clear triangle pattern formation in play as the EURUSD oscillates between the upper and lower trend lines and price moves towards the pattern apex. A bearish breakout scenario could potentially be imminent.
- Fridays downside price action has given a bearish candle with a close near the daily low. Any move lower as the new week begins would see a test of longer term range lows around 1.3000.
- A break below this level could potentially see additional volatility if stop losses are clustered under the round number and price structure lows. There are two lower support lines at the current area which provides a technical confluence “energy” level. EURUSD bears will be looking to avoid a false breakout lower like the one seen on the 16/4/2012 which had price subsequently rally around 300 pips higher after spiking below support.
EUR-USD Daily Chart
EUR-USD 10 Day Volatility