- EUR/USD has started to consolidate its weekly gains above 1.0500.
- Nonfarm Payrolls in the United States are expected to rise by 200,000 in November.
- Near-term technical picture shows the pair is about to turn technically overbought.
EUR/USD has gone into a consolidation phase above 1.0500 early Friday after having reached its highest level since June at 1.0540 earlier in the day. November jobs report from the US could ramp up the pair's volatility in the early American session.
The data published by the US Bureau of Economic Analysis revealed on Thursday that inflation in the US, as measured by the Personal Consumption Expenditures (PCE) Price Index, declined to 6% on a yearly basis in October from 6.3% in September. This reading came in below the market expectation of 6.2% and caused the US Dollar to continue to weaken against its rival.
Later in the session, the USD selloff picked up steam after the ISM reported that the Manufacturing PMI dropped to 49 in November from 50.2. More importantly, the Price Paid component of the PMI survey dropped to 43, pointing to a deceleration in the sector's input inflation.
As investors await the November jobs report, the US Dollar Index is already down more than 1% this week. Nonfarm Payrolls (NFP) are expected to rise by 200,000 following October's better-than-expected 261,000 increase.
Despite the upbeat October NFP reading, the US Dollar struggled to find demand as the details of the report revealed that the annual wage inflation declined to 4.7% from 5% in September. Hence, a similar market reaction could be expected. Unless the NFP beats the market expectation by a significant margin, the USD could face renewed selling pressure especially if wage inflation continues to soften. On the other hand, an unexpected increase in the Average Hourly Earnings (YoY) combined with an NFP print above 250,000 could force EUR/USD to turn south ahead of the weekend.
Nonfarm Payrolls Preview: Dollar selling opportunity? Low expectations to trigger temporary bounce.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart stays within a touching distance of 70, suggesting that the pair could stage a technical correction before the next leg higher. On the upside, interim resistance seems to have formed at 1.0540. In case buyers manage to flip that level into support, additional gains toward 1.0600 (psychological level, static level) and 1.0630 (static level) could be witnessed.
1.0500 (former resistance, psychological level) aligns as initial support. With a four-hour close below that level, sellers could take action and drag the pair toward the 1.0410/1.0390 area, where the 20-period and the 50-period Simple Moving Averages are located.
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