EUR/USD Forecast: Euro trades near key technical level ahead of NFP
- EUR/USD stays in a consolidation phase below 1.0900 early Friday.
- Nonfarm Payrolls in the US are forecast to rise by 113,000 in October.
- 1.0870 aligns as a key pivot level for the pair.
EUR/USD closed the fourth consecutive day in positive territory on Thursday before going into a consolidation phase below 1.0900 on Friday. In the early American session, October employment data from the United States (US) will be watched closely by market participants.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.70% | 0.52% | -0.50% | 0.35% | 0.74% | 0.31% | -0.43% | |
| EUR | 0.70% | 1.34% | 0.13% | 1.05% | 1.53% | 1.00% | 0.29% | |
| GBP | -0.52% | -1.34% | -0.37% | -0.16% | 0.25% | -0.25% | -0.78% | |
| JPY | 0.50% | -0.13% | 0.37% | 0.91% | 0.60% | 0.05% | -0.41% | |
| CAD | -0.35% | -1.05% | 0.16% | -0.91% | 0.34% | -0.12% | -0.74% | |
| AUD | -0.74% | -1.53% | -0.25% | -0.60% | -0.34% | -0.55% | -1.21% | |
| NZD | -0.31% | -1.00% | 0.25% | -0.05% | 0.12% | 0.55% | -0.73% | |
| CHF | 0.43% | -0.29% | 0.78% | 0.41% | 0.74% | 1.21% | 0.73% |
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).
EUR/USD benefited from the selling pressure surrounding the US Dollar (USD) following mixed macroeconomic data releases on Thursday and extended its weekly uptrend. The Initial Jobless Claims declined by 12,000 to 216,000 for the week ending October 26, while the Employment Cost Index rose by 0.8% in the third quarter, falling short of the market expectation for an increase of 0.9%.
Nonfarm Payrolls (NFP) in the US are forecast to rise by 113,000 in October following the 254,000 increase recorded in September. A reading below 100,000 could trigger another leg of USD selloff and allow EUR/USD to push higher. On the flip side, a positive surprise, with an NFP print of 150,000 or higher, could support the USD and make it difficult for the pair to keep its footing heading into the weekend.
Investors could look to adjust positions ahead of the US presidential election and Federal Reserve policy meeting next week and trigger irregular movements in financial markets. Hence, it could be risky to bet on a directional move depending on the outcome of the US labor market data.
EUR/USD Technical Analysis
EUR/USD was last seen trading within a few pips of the pivot level at 1.0870, where the 200-day and the 20-day Simple Moving Averages (SMA) meet. Once the pair confirms this level as support, technical buyers could remain interested. In this scenario, 1.0900 (round level, static level) could be seen as interim resistance before 1.0940 (100-day SMA) and 1.1000 (round level, 50-day SMA).
If EUR/USD fails to clear 1.0870, it could come under renewed bearish pressure and retreat toward 1.0800 (round level) and 1.0750 (static level).
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.
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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.
