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What Investors Should Know About Fintech, High-Frequency Trading and Flash Crashes

Key Levels for #EURUSD in the #HFT-dominated #forex #trading

As the most popular currency pair among retail traders, the EURUSD sits at a critical level. The weeks to come may prove decisive, with medium and long-term consequences for both bulls and bears.

Last Friday’s NFP (Non-Farm Payrolls) in the United States revealed a staggering jobs data: 223k jobs created, 3.8% unemployment rate and wave growth climbed to 2.7%. Especially the last number impresses, as puts pressure on inflation and keeps the Fed on track for a new rate hike at its June meeting.

Even the details looked impressive. The labor participation rate sits at a multi-year high, as more and more people join the labor force.

Naturally, the USD liked the report. As one of the key pieces of economic data, the NFP’s price action is dominated by high-frequency trading industry. Trading algorithms buy or sell the USD in a blink of an eye based on what the actual data points.

However, despite the fantastic data, the USD failed to rally. And, the key to the USD medium to long-term trading may sit with the EURUSD pair.

EURUSD Testing Major Trendline

For the first time in more than a year, the EURUSD tested a major trendline on an important timeframe: the daily chart. Since it turned from almost parity, it exploded higher to over 1.25 in one of the strongest trends seen lately.

EUR/USD Daily Chart
EUR/USD Daily Chart

Traders of all types (scalpers, swing traders, investors) watch this trendline as it may prove decisive for the pair and the USD. While it held on the first test, one small detail spoils the bulls party: the pair broke the higher-lows series that defines a bullish trend.

Higher-Lows Series Broken

A bullish trend has a series of higher-highs and higher-lows. Until it holds, all traders do is to buy the dip. Not anymore, as the series just broke when the price met the trendline.

EUR/USD Daily Chart
EUR/USD Daily Chart

In other words, this is just getting interesting for the bears. If the left area’s consolidation from the chart above is the left shoulder of a potential head and shoulders formation, then the measured move points to the 1.10 round number.

Conclusion

As we head into summer trading, the month of June is critical. The ECB and the Fed will decide on their monetary policies in two consecutive days, making volatility to rise for sure.

The key levels to watch on the EURUSD are 1.1550 on the downside and 1.1850 on the upside. A break lower sees no support all the way to the 1.10 round number, while a break higher implies another move above 1.20 is in the cards.

With inflation surprising to the upside, it will be exciting to see how the ECB will still keep the interest rate level into the negative territory. Euro traders will closely watch any hawkish hint.

This article was written by AMarkets

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