EUR/USD Forecast: Are bulls still in control? Highly uncertain Non-Farm Payrolls to determine

Negative Non-Farm Payrolls? That could turn to make the recent slide short-lived – like TikTok's videos. President Donald Trump hit ByteDance, the Chinese owner of the popular social network with an executive order that will likely hasten its firesale to Microsoft. 

While TikTok has been in the spotlight for several weeks, the more surprising move came against WeChat – lesser-known in the West, but one of China's largest platforms – considered in some circles as more robust than Facebook, LinkedIn, and others. Shares in Asia and S&P 500 futures dropped, boosting the safe-haven dollar. 

The move comes ahead of talks between the US and Chinese trade officials ext week, aimed to take stock of the Phase One deal. When referring to the accord, the world's largest economies expressed satisfaction.

Stoking tensions may serve a political cause – Trump is trailing rival Joe Biden ahead of the presidential elections and focusing on China may help the incumbent narrow the gap and could be forgotten when negotiators meet and smile. 

On the other hand, the greenback's gains remain limited amid stalled talks between Republicans and Democrats over the next relief package. Steven Mnuchin, America's Treasury Secretary, said that there has been some progress on several topics but no advances on others. 

The federal top-up of $600/week to the unemployed is the most significant help that expired at the end of July, and consumption could decline without it. The stalemate in talks is weighing on the dollar as it implies a weaker economy. 

The tie-breaker is July's all-important Non-Farm Payrolls report. Expectations have been cooling down throughout the week, after employment components in the purchasing managers' indexes pointed to contraction. Moreover, ADP's private-sector labor figures showed a meager restoration of only 167,000 positions, nearly a tenth of 1.5 million expected.

While the most recent jobless claims figures dropped, the data refers to the latter part of July, after NFP surveys were held, thus making it irrelevant for the upcoming publication. 

The economic calendar is pointing to an increase of 1.5 million jobs and a small decrease in the double-digit unemployment rate. However, real estimates range from a loss of jobs to an even greater one. 

See:

• Non-Farm Payrolls complicated by coronavirus and confusing data, dollar, gold implications
• Nonfarm Payrolls Preview: Hints point to an awful July
• US Non-Farm Payrolls July Preview: A dual track labor market or imperfections in the data?

The deterioration is a result of coronavirus' resurgence from mid-June, resulting in more deaths in July. 

Source: New York Times

COVID-19 cases are rising also in the old continent, with over 1,000 daily cases in Germany, France, and Spain. Nevertheless, the old continent's better situation provides an advantage for the euro. German industrial output beat estimates with a bounce of 8.9% in June, also supporting the common currency.

All in all, Sino-American relations, fiscal stimulus talks – and Non-Farm Payrolls stand out. 

EUR/USD Technical Analysis

Euro/dollar is trading above the 50, 100, and 200 Simple Moving Averages on the four-hour chart, and benefits from upside momentum. The Relative Strength Index has moved away from the 70 level – further away from overbought conditions. 

Overall, bulls have the upper hand. 

Resistance awaits at 1.1850, which provided some support when EUR/USD traded on higher ground. It is followed by the 1.1909-1.1916 area – combining July's and August's peaks. The next level is the psychologically significant 1.20.

Support awaits at the daily low of 1.1820, followed by 1.1780, which was a stepping stone on the way up. Next, 1.1730 and 1.17 provide support.