EUR/USD Analysis: Post-NFP USD softness helped bounce off 2-week lows

• EUR/USD staged a modest bounce on Friday on weaker US jobs report.
• The USD held on the defensive and remained supportive of the bid tone.

The EUR/USD pair had some good two way moves on Friday and was solely influenced by the US dollar price dynamics. The pair initially witnessed some follow-through selling and fell below the 1.1100 round figure mark, or fresh two-week lows amid the prevalent USD buying interest in response to easing geopolitical tensions in the Middle East. The pair later turned higher in the wake of some USD profit-taking following the release of the US monthly jobs report.

Softer USD helped stage a modest recovery

In fact, the headline NFP showed that the US economy added 145K jobs in December as compared to 164K expected and worse than the previous month's downwardly revised reading of 256K (266K reported earlier). Moreover, average hourly earnings also fell short of market expectations and came in to show a modest 0.1% during the reported month. The yearly wage growth rate eased to 2.9% from 3.1% previous, which added to the disappointment and largely offset a steady unemployment rate at 3.5%.

The pair recovered around 45 pips from early swing lows and finally settled near the top end of its daily trading range, still in the red for the second consecutive week. The USD remained on the defensive at the start of a new trading week and further strengthened the bid tone surrounding the pair, though the uptick lacked any strong bullish conviction. The market focus now shifts to the potential signing of the phase-one US-China trade deal later this week, which along with a slew of important releases from the US and the Eurozone might play a key role in determining the pair's next leg of a directional move.

Short-term technical outlook

From a technical perspective, the pair once again showed some resilience near 50-day SMA on Friday. The mentioned support nears 61.8% Fibonacci level of the 1.0981-1.1239 positive move, which is closely followed by confluence support comprising of 100-day SMA and the lower end of over three-month-old ascending trend-channel. Sustained break through the mentioned confluence support might be seen as a key trigger for bearish traders and pave the way for an extension of the recent pullback from multi-month tops.

On the flip side, any further recovery now seems to confront fresh supply near another confluence resistance around the 1.1140-50 region – comprising of 200-DMA and 38.2% Fibo. level. Sustained strength above the said barrier might negate any near-term bearish bias and set the stage for a move beyond the 1.1200 handle, possibly towards retesting the recent swing high resistance near the 1.1240 region. The momentum could further get extended towards the 1.1300 round figure mark en-route the top end of the mentioned ascending trend-channel.