- EUR/USD has been on the back foot after President Trump announced he contracted coronavirus.
- US Non-Farm Payrolls, the fate of US fiscal stimulus, and further reactions to the bombshell news are eyed.
- Friday's four-hour chart is painting a mixed picture.
"The end of the pandemic is in sight" – President Donald Trump's words at a speech on Thursday. Hours later, he tweeted that he contracted COVID-19. The leader of the world's most powerful country and his wife tested positive for coronavirus after Hope Hicks, a senior adviser, also caught the disease.
The bombshell news threw markets into disarray, as it raises many questions. How will it impact the elections? On the one hand, sympathy toward Trump could help his chances, but the renewed focus on his mishandling of the crisis may hurt the probability of him winning the elections.
Trump is 74 years old and is overweight, meaning he is in a high-risk group. Rival Joe Biden, who is is 78, spent over 90 minutes with the president in the debate on Tuesday.
In the last minutes of that debate, Trump refused to say if he would accept the election results, sending stocks lower. However, the mood rapidly changed in response to headlines suggesting progress in fiscal stimulus talks. While Republicans and Democrats have yet to reach a deal, it seems that investors are more focused on the next relief package than who becomes the next president – at least for now. The focus on the president's virus lowers the chances for a deal.
Higher uncertainty resulted in a drop in stocks and a moderately stronger dollar. The safe-haven greenback is on the rise but remains somewhat hesitant – typical to trading ahead of the Non-Farm Payrolls. The jobs report for September is set to show an increase of 850,000 positions, fewer than in August but still a robust statistic in absolute terms. The unemployment rate is forecast to fall from 8.4% to 8.2%.
Indicators published ahead of the NFP were upbeat – the ADP labor figures showed an increase of 749,000 private-sector jobs. Moreover, the ISM Manufacturing Purchasing Managers' Index's employment component also pointed to a pickup in hiring.
- Nonfarm Payrolls Preview: Eagerly waiting for an upbeat report
- US Employment Situation Report September Preview: A challenge to define normality
A robust report should be positive for stocks but has to be taken in the context of fiscal stimulus talks – as it could lower the motivation for lawmakers to strike an accord. After August's figures exceeded projections, Republicans lowered their offer to under $1 trillion, and recent history may repeat itself.
Conversely, a disappointing statistic could turn into good news, as it would push the parties over the line. Recent reports suggest that Democrats want a package worth over $2 trillion and Republicans are willing to settle for around $1.6 trillion.
What about the eurozone? COVID-19 cases are on the rise in the old continent and continue weighing on the common currency. Economists expect the preliminary Consumer Price Index to show subdued inflation, in both the headline and Core CPI.
All in all, the focus is on the US, with Trump's coronavirus, Non-Farm Payrolls, and stimulus talks in play.
EUR/USD Technical Analysis
Euro/dollar has been able to hold onto the 50 Simple Moving Average on the four-hour chart. On the other hand, upside momentum is waning and the currency pair failed to break above the 100 SMA. Limited movements have generally balanced out indicators.
Support awaits at 1.1685, which was a swing low earlier in the week. It is followed by 1.1625, a support line from last week, followed by the previous week's trough 1.1610.
Resistance awaits at 1.1740, which was a low point in mid-September, followed by 1.1770, the weekly high. Next, 1.1785 and 1.1830 await EUR/USD.
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