EUR/USD. Uncertainty ahead of non-farms

EUR/USD (1.2838) is up slightly overnight and consolidating the sharp rally Wednesday. There is caution ahead of the non-farm payrolls report.

Technicals:

• Trend: Daily higher; Weekly higher.

• Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.

• Support / Resistance Levels: Support for EUR/USD lies at 1.2588 (Aug24 low), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2856 (Sep1 high), 1.3334 (Aug 6 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

• The risk reversal (3m, 25delta) rose overnight with the rise in spot. The reversal is in the middle of its six-month range, and it appears to be trading an uptrending channel, providing some support for the move higher in spot.

• Implied Vol (3m) fell overnight, and it is falling into the bottom-third of its six-month range.

Cross-asset valuation: The only significant correlation that EUR/USD has exhibited during the past 60 days is with the SPX (positive).