EUR/USD Forecast: Well-positioned to resume the rally ahead of Non-Farm Payrolls

• EUR/USD has been holding onto Fed-related gains and ahead of the Non-Farm Payrolls.
• Mixed euro-zone data greets incoming ECB President Lagarde.
• Friday's four-hour chart is bullish for the currency pair.

After the Federal Reserve has seemed to set a floor under EUR/USD – the US jobs report may send it beyond the ceiling. The US Dollar has been on the back foot after Jerome Powell, Chairman of the Federal Reserve all but ruled out rate hikes. The world's most powerful central bank wants to see a sustainable rise in prices before considering a hike. On the other hand, the Fed's bar for slashing rates again is lower. 

This dollar-depressing asymmetry is set to be tested in today's Non-Farm Payrolls. The economic calendar is showing an expected gain of 89,000 jobs in October after 136,000 in September. The projected weakness stems from a long strike in General Motors – which may have shed no fewer than 50,000 jobs. Markets are well-aware of the industrial action at GM and are unlikely to be alarmed by a sub-100K figure. However, a level closer to 50,000 may already trigger a more significant sell-off.

Average Hourly Earnings are set to rise by 0.3% monthly – after remaining flat last month – and the annual increase is set to accelerate from 2.9% to 3%. The Unemployment Rate – which hit a 50-year low of 3.5% – is forecast to edge up to 3.6%. Despite a slowdown in hiring in recent months, America's labor market is still doing well.

See US Non-Farm Payrolls Preview: The trend remains the same

The dust will not have settled from the NFP before ISM's Purchasing Managers' Index for the manufacturing sector is set to move markets. The publication tends to precede the jobs report and serve as a hint. This time, it has the stage to itself and will provide fresh, forward-looking data about the weaker side of the economy. September's score of 47.8 points raised concerns of a recession. It is projected to have recovered in October – but to remain below the 50-points threshold separating expansion and contraction.

See US October Manufacturing PMI Preview: Waiting for the China deal

Manufacturing has been impacted by the US-Sino trade wars. High-level officials from the world's largest economies will hold a telephone call later today, to advance talks. While both sides have expressed optimism in public, reports suggest that China doubts a comprehensive deal can be reached with President Donald Trump.

New ECB boss has her work cut out for her

Today is Christine Lagarde's first day as President of the European Central Bank. The former French finance minister and Managing Director of the International Monetary Fund takes over the Frankfurt-based institution amid falling inflation. Thursday's preliminary figures for October have shown another slowdown in the headline Consumer Price Index – 0.7% yearly, the lowest since 2016. Some comfort can be found in the pick in Core CPI to 1.1%, which supported the euro. 

The euro area's Gross Domestic Product beat expectations with 0.2% quarterly but reflected the ongoing slowdown with only 1.1% yearly. Perhaps the scariest data point for Halloween's batch of data came from the Unemployment Rate – which rose to 7.5% in September after many months of drops. 

Can Lagarde lift inflation, as well as growth and employment? Can she match the recent Fed dovishness? She inherits a divided Governing Council, which is torn between supporters of ultra-loose policy and those who think that her predecessor Mario Draghi's policies have reached their limits. 

Overall, US data is set to dominate, but some speculation about Lagarde's first moves may also come into play.

EUR/USD Technical Analysis

EUR/USD is enjoying upside momentum on the four-hour chart and is comfortably trading above the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index has dropped below 70 – thus exiting overbought conditions. 

All in all, bulls are in full control. 

The currency pair is struggling with 1.1160, which was a swing high in late October. Resistance awaits at 1.1180, which was the peak last month and the highest level since the summer. Next, we find 1.1230, a stubborn cap from August. It is followed by 1.1250, which held EUR/USD down earlier that month. The next levels to watch are 1.1320 and 1.1390. 

Support awaits at 1.1130, which provided support on Thursday. It is followed by 1.1095, which was a swing low last week. It is closely followed by 1.1070 – a double bottom created in recent days. Next, we find 1.1035, which capped EUR/USD on the way up and converges with the 200 SMA.