The current pennant formation in EUR/USD that began in June with 1.1510 and 1.1853 parameters has been well validated since, but ever-tightening ranges suggest an impending breakout.
It survived a 1.1746 spike on Tuesday, closing at 1.1691, well within the structure.
It survived the FOMC meeting last night, the ECB decision and U.S. Q2 GDP last week, but as the parameters narrow, U.S. payrolls on Friday could easily be the trigger for a breakout.
The Reuters poll forecasts a headline 190,000 rise in jobs, the unemployment rate to fall to 3.9 percent from 4.0 percent, and closely watched average hourly earnings up to 0.3 percent month-on-month from 0.2 percent.
ADP jobs data beat 185,000 expectations yesterday, coming in at 219,000, which suggests upside risk for payrolls nZON1YCY00 nL1N1UR175.
Correlations between the USD and risk/yields and data are weak at present, but a decent miss in payrolls will certainly spark volatility.
The pennant formation suggests that a sustained break of current 1.1608 or 1.1723 levels would target the 1.1510/1.1853 starting points.
Even if the formation survives tomorrow's payrolls, a breakout is due, and should prove to be directional for EUR/USD next week.
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