EUR/USD Forecast: Euro recovers but not out of the woods

The EUR/USD rose on Thursday, boosted by a weaker US Dollar ahead of NFP.
There is a short-term positive bias for the pair, but it is limited.
The Euro is still under pressure amid expectations of rate cuts from the ECB.

Matías Salord FXStreet

The EUR/USD rose from weekly lows near 1.0750 and climbed above 1.0800 on Thursday, boosted by a weaker US Dollar. The focus now turns to US official employment data, which is due to be released on Friday.

In Germany, Industrial Production dropped by 0.4% in October, contrary to expectations of a 0.2% increase. This report contributes to a negative economic outlook for the region. On Friday, the Eurozone will release the final reading of the November Consumer Price Index, which is not expected to bring any surprises, with the annual rate at 3.2%.

The US Dollar dropped across the board on Thursday as US yields continued to decline. The 10-year yield dropped from 4.17% to 4.11%, and the 2-year yield fell to 4.57%, approaching recent lows. Yields in Europe also moved with a negative trend as markets anticipate the European Central Bank (ECB) cutting rates in March of next year. The Federal Reserve (Fed) is also seen loosening monetary policy in the future. This divergence weighed on the EUR/USD during the last session, but the Greenback lost its momentum, influenced by some improvement in risk sentiment and ahead of another US job report that is expected to provide more evidence of a softer labour market.

Data released on Thursday showed a decline in Continuing Claims after last week's surge to 1.861 million, although they remain near multi-year highs. On Friday, the official employment report is expected to show an increase in payrolls by 180,000, surpassing the 150,000 recorded in September.

EUR/USD short-term technical outlook

The EUR/USD rebounded from the 100-day Simple Moving Average (SMA) but held under the 20-day SMA. Technical indicators on the daily chart are mixed, with Momentum below the midpoint and the Relative Strength Index (RSI) turning north. On the weekly chart, the pair found support at the 20-week SMA; Euro bulls need to avoid a weekly close below 1.0750.

On the 4-hour chart, the pair is trending slightly above the 20-SMA and an upward trendline. Technical indicators favor the upside for the following hours. However, the upside may be limited due to a potential lack of volatility ahead of NFP, which could lead to a consolidation around 1.0800. A break below 1.0780 could weaken the Euro, while a move above 1.0830 could provide a boost.

View Live Chart for the EUR/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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