The EUR/USD has overcome the 1.3000 psychological level to hit a fresh 2-week high at 1.3030 after the European Central Bank decided to keep rates unchanged and Mario Draghi offered little details on the OMT program announced last month, although he said it has helped to ease market tensions. Signs of an improving jobs market in the United States also supported equities ahead of Friday's non-farm payrolls.
Market considered that enough to buy the EUR/USD, that stands near 1.3000 and with a strong upward momentum according to the hourly chart. "Early week range has been broken to the upside, with scope now to test 1.3030 before facing some selling interest," comments Valeria Bednarik from FXstreet.com. "Above this last, doors will open for a ride towards 1.3100 later on the day."
Stocks also joined the situation as the Dow added 80.75 points, or 0.6%, to 13,575.36. The S&P 500 climbed 10.41 points, or 0.7%, to 1,461.40, gaining for a fourth successive session. The Nasdaq rose 14.23 points, or 0.5%, to 3,149.46. Worthy of note, oil prices surged Thursday as traders keep a close eye on escalating tensions between Syria and Turkey, which could lead to oil supply disruptions.
After the ECB decided to level the ball is in the governments' court again, Euro and the Pound rallies towards intra-week highs but the EUR/USD could face some hesitation heading into the U.S. non-farm payrolls report release. "With the ECB decision out of the way, markets will be looking ahead to tomorrow's US September nonfarm payrolls report", says Wells Fargo team. "Judging from recent US data, the jobs numbers should not be particularly weak, which in our view could play into further gains in risk-sensitive commodity and emerging currencies".
"This time around," comments the Saxo Bank team, "we have EUR already very strong with tail risk already virtually priced out and we have the QE3 launch in the rear view mirror as well, though we know that worse employment means more QE while good data theoretically encourages USD-funded carry trading."
Wells Fargo Bank's Currency Strategist, Vassili Serebriakov things that the EUR/USD could extend gains after positive NFP. "With the ECB decision out of the way, markets will be looking ahead to tomorrow's US September nonfarm payrolls report", he says. "Judging from recent US data, the jobs numbers should not be particularly weak, which in our view could play into further gains in risk-sensitive commodity and emerging currencies".
So, market should expect a positive EUR/USD reaction to tomorrow's employment report as consensus expects 113K-115K figures and as market responds positively to Draghi's comments, the chance of a EUR/USD rally on a strong non-farm payrolls is even greater. But as Kathy Lien from BK explains, "job growth needs to exceed 125k to lift the dollar and risk appetite. Anything between 95k and 125k will not have much impact on the greenback. Should payrolls rise less than 95k however, the dollar will most likely weaken against the Japanese Yen and strengthen against other currencies as risk aversion returns."