EUR/USD Forecast: Looking powerful ahead of Powell and the Non-Farm Payrolls

Is the euro immune to bad news from Germany? That seems to be the notion after EUR/USD ignored the disappointing drop of 0.6% in Germany's industrial output in July – well below an increase of 0.3% that was expected. The downbeat data joins a plunge of 5.6% in factory orders for July published earlier this week.

The rise in EUR/USD may stem from US dollar weakness. Markets are cheering the US and Chinese optimism about reaching a trade deal. Hu Xijin, the editor in chief of the Chinese media outlet Global Times  – and considered the mouthpiece of the regime – has also expressed hope that an accord can be reached. Previous rounds of talks have been inconclusive. 

Non-Farm Payrolls and Powell eyed

The first Friday of the month features the all-important US employment report – the Non-Farm Payrolls. Economists expect an increase of 158,000 jobs in August, similar to July's 164,000 increase. Wages are projected to rise by 0.3% monthly and marginally decelerate from 3.2% to 3.1% yearly. The labor market figures always move markets and also feed into the upcoming decision of the central bank.

Indicators leading to the publication were mixed. ADP's Non-Farm Payrolls report for private-sector employment showed an increase of 195K, exceeding expectations. On the other hand, the employment gauge in ISM's Purchasing Manager's Index for the services sector reflected a slowdown in hiring – while overall activity in the sector improved. 

See: 

• US Non-Farm Payrolls Preview: Against all odds
• Leading indicator point to more dollar weakness in the NFP

Jerome Powell, Chair of the Federal Reserve, will have the last word of the week – and will be the last Fed official to speak before the bank enters its "blackout period." Tension is already mounting ahead of the September 18 decision. After several Fed members provided contrasting views earlier this week, Powell's speech in Zurich will be closely watched.

He may release clues of the Fed's intentions – cutting rates by the standard 25 basis points, injecting significant stimulus with a 50bp reduction, or holding back for now. The Fed Chair may also comment on the jobs report.

All in all, US data and Powell's speech stand out today.

EUR/USD Technical Analysis

EUR/USD is enjoying upside momentum on the four-hour chart and has confirmed its break above the 50 Simple Moving Average. The Relative Strength Index (RSI) is still below 70 – outside overbought conditions. The currency pair is trading above an uptrend support line. The technical picture is positive.

Some resistance awaits at 1.1050, which was a swing low in late August. It is followed by 1.1185, which was a high point on Thursday. Further up, 1.1115 capped EUR/USD in mid-August and 1.1130 provided temporary support later last month.

Support awaits at 1.1020 which was a low point earlier this week. The round number of 1.1000 follows. Next, we find 1.0960, which was a swing low last Friday, and 1.0926 – the 2019 trough.