FXstreet.com (Barcelona) - A volatile day is what was expected, and a volatile day is what market participants received. After initially trading as high as 1.3216 after the ECB Rate Cut announcement, the pair sharply reversed gains during the Mario Draghi press conference and finished the day down 123 pips at 1.3061. In what has already been a very busy week on the economic front, perhaps the most important event (US Non Farm Payrolls est. 146k) will be released at 12:30GMT.

Although many believe the dovish rhetoric in the ECB press conference will likely lead to further weakness in the near term, others are not so sure it will be that easy. Some analysts believe tomorrow will be a major event for the pair, and should the numbers come in below estimates (like previous), we could see a major move higher in EUR/USD.

According to Kathy Lien of BK Asset Management, “With the European Central Bank's monetary policy announcement behind us, the focus of the forex market will now turn to the non-farm payrolls report. By cutting interest rates today and signaling that they are prepared to do more, the ECB has set a low bar for tomorrow's NFP release. Anything above 150K will be a relief because it means that the Federal Reserve will not be increasing stimulus alongside the ECB. However if payrolls rise by less than 100K, we expect to see a big short squeeze in the EUR/USD. Anything between 100k and 150K will probably elicit only a mild reaction in the greenback.”

Other analysts believe that even if we do see improvement in the US jobs data, the overall employment picture is likely to remain fragile for quite awhile going forward.

According to Eric Viloria of Forex.com, “For now, we think that job growth will pick up from the previous month but remain weak overall. Job growth of 131k is well below the rolling 1-year and 2-year average job growth of about 159k and 180k respectively. Recent labor market data has been on the soft side with a decline in the ADP (Automatic Data Processing) payrolls to 118K in April from the prior 131K."

He went on to add, “The employment component of the ISM (Institute for Supply Management) manufacturing report fell to 50.2 from the previous 54.2 which indicates only narrow expansion. The ISM service sector report, which we tend to weigh more heavily in our forecast model since services represent a much larger portion of the US economy, will be released tomorrow after the BLS (Bureau of Labor Statistics) monthly employment report.”

From a technical perspective, it’s important to note that although the EUR/USD suffered a huge reversal today, it really only took the pair back into the recent trading range between 1.3200 and 1.2950. In a sense, the overall trend remains neutral as neither side can seem to achieve any follow through for more than a few days.

According to Val Bednarik of FXStreet.com, “Market was all about ECB this Thursday, with the EUR/USD holding pretty well around 1.3200 after a 0.25% rate cut and Draghi dovish statement. But when during the press conference he said that the Central Bank was “technically ready” to cut deposit rates to negative, the pair succumbed and fall as low as 1.3036 before bouncing slightly higher. While in the bigger picture, the pair maintains the range and trades in the 1.30/1.32 area, another failure at the high and the strong slide breaking below the Fibonacci level at 1.3115, increases chances of a break lower, again.”

She went on to add, “Far from the bottom of the range around 1.2970, the hourly chart shows a tight range, as investors are now waiting for the last major event of the week, US NFP figures on Friday. Expected around 146K after a disappointing 88K reading last month, a positive number may fuel dollar gains, as it will suggest QE may come to an end in the US this year. Another negative number will see the pair back nearing highs well into the 1.31 area. As for the short term, indicators remain in oversold territory, but the inability of price to recover, exposes the downside, with immediate support at 1.3040. Bears will lead now as long as price holds below mentioned 1.3115 level.”