EUR/USD - Will Volatility Tighten Ahead of NFP?

1H: This is a follow up to this mornings EUR/USD update, where I was stalking the correction rally.

So far the market has held the pair below 1.2740, an important area as I mentioned.It has become a pivot for a decline in the US session.

The decline now tests the 1.2670 level, which is 61.8% retracement of the “corrective rally”. If the market can sustain a break below, the bearish scenario can continue. The RSI should also break below 40 in this case. The RSI in the 4H chart should also break below 40.

However, knowing that there is event risk for the greenback on Friday in the form of the non-farm payroll, volatility is likely to decline once the market finds a pre-release equilibrium.

This is not always the case, as the market can become volatile in anticipation of the release. The fact is that it is already becoming more volatile during this 2nd trading session of the week.

If the 1H ATR starts to decline throughout the Asian and then European session, the market is likely winding down activity before the release.

Therefore, if the market breaks 1.2740 or below 1.2670, make sure it is with force ( more than 1 ATR, which is 25 in the 1H chart at 4:00PM ET).

Otherwise, the market may be simply consolidating in a range roughly below 1.28 and above 1.26.