06.12.201900:56 Forex Analysis & Reviews: EUR/USD. Selling is risky, purchases are unreliable: bulls are trying to reverse the trend

Following a short price pullback, the euro-dollar pair again shows a fighting character, testing the boundaries of the 11th figure. The pair ended yesterday in the negative territory - after reaching a multi-week price peak of 1.1116, the pair fell in a matter of hours to the middle of the 10th figure. But the downward impulse turned out to be false - the price suspended its decline, and resumed growth during the US session on Thursday. I mentioned the dollar's vulnerability yesterday - the downward price movements of EUR/USD should be treated with extreme caution, not forgetting the stops. Tomorrow's Nonfarm, as well as news from the front of the US-Chinese negotiations, can have a strong impact on the pair, and it is extremely difficult to predict the future direction of the price.

Let me remind you that according to the report that ADP released, only 67 thousand jobs were created in November in the US private sector. This is the lowest result in the last five months, that is, from May, when the US labor market unexpectedly fell (Nonfarm then reached the level of 72 thousand). According to the same report, the number of jobs significantly declined by 18 thousand in the manufacturing sector. In other words, another wake-up call was sounded yesterday in the form of a weak report from the ADP agency.

Now the market is waiting for the main macroeconomic report of the week, which will be published tomorrow. If the official figures repeat the trajectory of data from ADP, the dollar will again fall under a wave of sales - in that case, rumors will intensify in the market about another round of easing of monetary policy at the beginning of next year.

But here it is worth emphasizing that the current situation is somewhat different from the May one. Then the traders were ready for Nonfarm to come out at low values (although real numbers were weaker than a weak forecast). To date, a consensus forecast for official data suggests that the labor market will show growth in November: 189 thousand jobs created with unemployment at a record low of 3.6%. Therefore, a certain intrigue regarding Friday data remains. A separate line should pay attention to the inflationary component of Nonfarm - an indicator of the average hourly wage. A month ago, this indicator came out at the level of 0.2% M/M and 3% Y/Y. This is a good result, and for the bulls of the pair it is important that tomorrow's release confirms the positive trend. Let me remind you that core inflation did not reach forecast values (in annual terms). Instead of projected growth of up to 2.4%, the core index remained at around 2.3%. In monthly terms, the indicator reached expectations, that is, at around 0.2%. Therefore, the inflationary component of Nonfarms is now extremely important for EUR/USD traders, even outside the context of an increase or decrease in the number of employees.

If we talk about the external fundamental background, then the situation is uncertain. On the one hand, negotiators continue to hold consultations as part of trade negotiations. On the other hand, recent political events are not conducive to mutual friendly steps. Earlier this week, Trump signed bills that actually support protesters in Hong Kong. China called this step a gross interference in the internal affairs of the state. Yesterday, the House of Representatives took another step toward worsening relations between the United States and China: congressmen approved a bill on sanctions for oppressing Uighurs in China. The document provides for sanctions against senior Chinese officials for violating human rights in Xinjiang. Beijing, in turn, again criticized the bill, calling it interference in the country's internal affairs.

At the same time, there are only ten days remaining until December 15. Prior to this date, the White House must decide on the introduction of new duties on Chinese imports. But according to unofficial information, the negotiators cannot reach a compromise on a number of key issues (necessary to sign the first phase of the deal) - these issues relate to how to guarantee Beijing's purchase of US agricultural products and which fees will be canceled by the United States. Amid continuing uncertainty, the dollar is showing general weakness in the market.

The technical picture of EUR/USD speaks in favor of the pair's growth. On the daily chart, the pair is located above the Kumo cloud of the Ichimoku Kinko Hyo indicator and above all its lines. The bullish Parade of Lines signal indicates the potential for further price growth. In addition, the pair is located on the upper line of the Bollinger Bands indicator. This also indicates the bullish mood of traders. We can consider the mark of 1.1190 - this is the upper line of the Bollinger Bands indicator on the W1 timeframe - as the closest target of the upward movement. Stop loss can be placed at 1.1030 - this is the lower boundary of the Kumo cloud on the daily chart, coinciding with the middle line of the Bollinger Bands indicator.