EUR/USD Forecast: Euro stabilizes above key support area ahead of NFP
- EUR/USD stays in positive territory above 1.1300 after a three-day slide.
- The near-term technical outlook is yet to highlight a buildup of bullish momentum.
- April Nonfarm Payrolls data from the US could trigger the next big action in the pair.
EUR/USD closed the third consecutive day in negative territory on Thursday and touched its weakest level in nearly three weeks below 1.1270. Although the pair stabilizes above 1.1300 in the European session on Friday, it remains fragile heading into the key April employment data release from the US.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.35% | 0.20% | 1.04% | -0.30% | -0.29% | 0.62% | -0.31% | |
| EUR | -0.35% | -0.21% | 0.69% | -0.66% | -0.74% | 0.26% | -0.68% | |
| GBP | -0.20% | 0.21% | 0.91% | -0.44% | -0.55% | 0.47% | -0.46% | |
| JPY | -1.04% | -0.69% | -0.91% | -1.32% | -1.30% | -1.83% | -1.10% | |
| CAD | 0.30% | 0.66% | 0.44% | 1.32% | -0.12% | 0.92% | -0.00% | |
| AUD | 0.29% | 0.74% | 0.55% | 1.30% | 0.12% | 1.02% | 0.08% | |
| NZD | -0.62% | -0.26% | -0.47% | 1.83% | -0.92% | -1.02% | -0.92% | |
| CHF | 0.31% | 0.68% | 0.46% | 1.10% | 0.00% | -0.08% | 0.92% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The US Dollar (USD) ignored mixed macroeconomic data releases from the US and preserved its strength on Thursday, causing EUR/USD to stretch lower. The improving risk mood on growing optimism about a de-escalation in the US-China trade conflict helped the USD outperform its rivals. Bloomberg reported that China's Commerce Ministry said that the US has taken the initiative to convey to China that the US is hoping to talk on trade.
In the second half of the day, the US Bureau of Labor Statistics will release the labor market data for April. Nonfarm Payrolls (NFP) are forecast to rise 130,000 following the impressive 228,000 increase recorded in March. The Unemployment Rate is expected to hold steady at 4.2%.
In case there is a significant negative surprise, with an NFP reading below 100,000, investors could see this as a sign pointing to a Federal Reserve (Fed) rate cut in June and trigger a USD selloff. On the flip side, an upbeat NFP print could cause EUR/USD to turn south ahead of the weekend.
According go the CME FedWatch Tool, markets are currently pricing in about a 42% probability that the Fed will maintain policy settings in June. This market positioning suggests that the USD faces a two-way risk heading into this event.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 despite the latest rebound. Additionally, EUR/USD continues to trade below the 50-period and the 100-period Simple Moving Averages (SMA) on the 4-hour chart, pointing to a lack of buyer interest.
On the upside, 1.1370-1.1380 (100-period SMA, Fibonacci 23.6% retracement of the latest uptrend) aligns as first resistance before 1.1430 (static level) and 1.1500 (static level, round level). Looking south, supports could be located at 1.1270 (Fibonacci 38.2% retracement), 1.1175 (Fibonacci 50% retracement) and 1.1080 (Fibonacci 61.8% retracement).
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
