An upbeat NFP could drive EUR/USD back to 1.0600

The single currency rebounded from an 11-year low the previous week and is currently moving slightly below the psychological level of 1.0800. Nevertheless, there is important economic data from the US and Europe coming up in the next couple of days, which is likely to have a significant impact on the direction of the pair, including the all-important US Non-farm Payrolls report for March as well as the employment reports from Germany and for Europe as a whole.

The NFP number looks to be strong again, at 242k in March. If we get a figure above 200k, this could have a potentially bullish effect on the dollar, which could add further pressure to the 1.0600 level, and it would mark the 14th consecutive month of job gains which exceeds the 200k. February’s US Non-farm payrolls increased by 295k after a downwardly revised 239k rise in January. At the same time, the jobless rate fell down to 5.5% from 5.7%, the lowest since 2008.

Meanwhile, the unemployment rate in Germany has fallen to the lowest level since the country’s reunification in 1990, which stands at 6.5%. Furthermore, wages in Germany are rising while inflation is at 0.1%, the lowest in five years. Coupled with the falling oil prices, is helping boost domestic demand at a time when investment is weak and exports are sluggish. On the other hand, unemployment in Eurozone remains high while inflation dropped below zero for the first time after five years driven mostly by the fall in oil and energy prices.

The EUR/USD pair held steady above some significant obstacles the last couple of days, including the 1.0590 – 1.0610 zone, the key support level of 1.0680, as well as the 50-period SMA on the 4-hour chart. In the meantime, we could see the euro bulls struggling to break above the significant resistance level of 1.1040, where the 200-period SMA is currently providing a strong resistance to the price action. Hence, fresh demand for euros can be anticipated once the pair rises above the aforementioned level, which can take the pair back towards the 1.1270 – 1.1300 zone, which coincides with the 23.6% Fibonacci retracement level.

On the other hand, sellers shall regain control if the pair fails to sustain above the key support level of 1.0770. Going forward, the medium and the long term trend remains a downtrend since the rate still lies below the descending trend line, which started back in May 2014. The 4-hour MACD is also looking bearish having crossed below its trigger line, however is struggling near its equilibrium level, while the Relative Strength Index is moving downwards below 50, suggesting that the market remains bearish on this pair.