EUR/USD Forecast: Falling ahead of the fireworks? Coronavirus concerns may outweigh Non-Farm Payrolls

What should markets focus on – upbeat three-week-old figures or tentative signs of a downturn? The answer is probably the latter. Concerns about coronavirus ravaging the US – with a record 55,000 cases on Thursday – seem to outweigh the surge of 4.8 million job gains in June's Non-Farm Payrolls report. The safe-haven US dollar is moving back up, keeping a lid on EUR/USD.

COVID-19 infections are up not only due to testing but are also seen in high positive test rates and pressure on hospitals. States continue reimposing restrictions or halting plans to reopen. Restaurant reservations and foot traffic to shops were down even before new limits came into force. Most recently, gasoline consumption has also begun turning down.

Texas, home to the robust oil industry, has seen Intensive Care Units passing normal capacity and has ordered people to wear face masks under certain conditions. President Donald Trump finally seemed to endorse such protection but has not put one on in recent days.

Four months before the elections, his mishandling of the crisis – which he said will "disappear" is costing him support in the polls, which show rival Joe Bien leading by over nine points, opening the door to a clean Democratic sweep.

Trump did come out to the press and touted the upbeat Non-Farm Payrolls figures for June. Around 4.8 million people went back to work, better than three million expected. The Unemployment Rate fell to 11.1%, also exceeding estimates of 12.3%. 

However, these are mostly temporary jobs that were restored. The percentage of permanent position losses rose from 11.4% to 21.4%. 

Source: FiveThirtyEight

And perhaps more importantly – the figures were taken on the week ending June 12 – just before the disease began lifting its ugly head. Weekly jobless claims for the week ending June 26 showed that initial applications remained stubborn just below 1.5 million while continuing claims are stuck close to 20 million as of the week ending June 19. 

More NFP Analysis: Good, but as good as it gets, re-closing is rapidly ravaged reopening gains

The most recent moves in EUR/USD are attributed to the broader market mood and developments in the US. Back at the old continent, coronavirus seems to be under control, with occasional flareups being put down quickly.

On the other hand, leaders are dragging their feet in regards to fiscal stimulus. Dutch Prime Minister Mark Rutte expressed hope that a compromise will be reached. His country is one of the "Frugal Four" opposing handing grants mutually funded by member states. 

Markit's final Services Purchasing Managers' Indexes for June will likely confirm the slow recovery – with milder contractions than beforehand. Spain's services PMI surprised with 50.2 points, better than 45.9 projected and indicating a return to growth. 

Will upbeat eurozone figures boost the euro and keep EUR/USD despite coronavirus concerns? That remains an open question.

Returning to America, it is Independence Day weekend. While stock markets are closed, futures trading is open – and states continue releasing COVID-19 statistics while foreign exchange trading continues, albeit with thinner liquidity.

EUR/USD Technical Analysis

Euro/dollar is trading within a narrowing triangle or wedge. Technical analysis textbooks suggest that this may eventually result in the pair picking a direction and then trending strongly. To what direction?

Momentum on the four-hour chart has all but disappeared. EUR/USD is trading below the 50 and 100 Simple Moving Averages but above the 200 SMA. All in all, bears have a marginal lead.

Support awaits at 1.1220, which is the daily low, followed by 1.1185, a stubborn support line from the recent week. Further down, 1.1160 was a low point in mid-June.

Immediate resistance awaits at the daily high of 1.1250, followed by 1.13, Thursday's peak. The next level to watch is the double-top of 1.1350 seen in mid-June.

More Non-Farm Payrolls: Immense uncertainty remains prevalent, markets may react