EURUSD could be ready to make another bounce, as the pair is creating an ascending trend line on its 1-hour forex chart. 

Price just jumped to the 1.1400 handle recently before retreating towards support around the 1.1250 minor psychological level.

This area lines up with a broken resistance level, which might now act as support. Stochastic is already indicating oversold conditions, suggesting that euro sellers are tired and that buyers could take over. If that happens, the pair could move back up to its previous highs at 1.1400 or create new ones.

The main event risk for this trend setup is the US non-farm payrolls release during the New York trading session. After printing dismal results in the previous month, a recovery in the jobs sector is expected this time. The FOMC did say that the recent slump was just transitory and traders are keen to see if the data would confirm this.

Analysts are expecting to see a 228K increase in hiring, stronger than the previous 126K gain, while the jobless rate is expected to improve from 5.5% to 5.4%. If that happens, traders could revive rate hike expectations for the Fed this year and allow the dollar to recover from its previous drop.

On the other hand, a weak reading could spark more dollar losses, as this would suggest that the Fed might stay put for the rest of the year. Fed Chairperson Yellen mentioned that they would consider tightening monetary policy only if they are reasonably confident about hiring improvements and the pickup in inflation.

A downside break below 1.1250-1.1200 area could confirm that further losses are in the cards, possibly until the next area of interest near 1.1000. For now, the short-term moving average is treading above the long-term moving average, indicating that the uptrend is intact. A downward crossover could be an early signal for a reversal.

By Kate Curtis from Trader’s Way