EUR/USD Forecast: Running out of steam and ready to fall ahead of Non-Farm Payrolls

  • EUR/USD has been holding onto gains around 1.11 amid upbeat trade headlines. 
  • Weak German data and the US Non-Farm Payrolls may send it down.
  • Friday's four-hour chart is pointing to overbought conditions.

De-escalation in the Sino-American trade war? China has announced it will begin implementing tariff waivers for some purchases of US pork and soybeans. This gesture of goodwill has pushed markets higher, weighed on the safe-haven dollar – and kept EUR/USD bid.

However, by offering this olive branch, Beijing is averting a commitment on the exact amount of agrifood buying – a critical demand from Washington. Moreover, the clock continues ticking down toward December 15 – when the US is set to slap new tariffs on China. President Donald Trump has indicated that talks are proceeding – but markets have heard such optimism before. Moreover, the president said an agreement might wait for after the November 2020 elections earlier this week. 

Trade headlines, coming from both countries, are set to continue whipsawing financial markets on Friday. However, the US jobs report is also due to have its share in moving currencies during the day. 

Focus shifts to Non-Farm Payrolls

Non-Farm Payrolls figures are expected to show an increase of 180,000 positions in November, up from 128,000 in October. Average Hourly Earnings are forecast to remain at 3% yearly growth, while the Unemployment Rate is also predicted to hold its ground at 3.6% – close to the historic lows.

Indicators leading toward the publication have been mixed, with weak figures from ADP and an upbeat employment component in the ISM Non-Manufacturing Purchasing Managers' Index. The Federal Reserve is watching the data ahead of its December 11 decision.


Troubles in the core of Europe

The old continent's largest countries are both grappling with several issues. German Industrial Production plunged by 1.7% in October, far worse than a modest increase that was projected. While Europe's powerhouse averted a recession, its economy is still not out of the woods. Friday's figures join disappointing Factory Orders earlier this week.

Germany's government is under pressure as the new leadership of the SPD – the center-left junior coalition partner – is taking over. Norbert Walter-Borjans and Saskia Esken are expected to demand changes from Chancellor Angela Merkel's CDU/CSU bloc – but the center-right party has issues of its own and is unlikely to give in easily. Political analysts foresee no imminent danger to the government, but politics has its own dynamics.

France has been rocked by massive strikes and demonstrations on Thursday against a planned reform in the pensions system. Industrial action is set to continue for several days. 

Overall, trade headlines and the Non-Farm Payrolls are set to dominate trading today.

EUR/USD Technical Analysis

EUR USD Technical Analysis December 6 2019

The Relative Strength Index on the four-hour chart is just above 70 – indicating overbought conditions – indicating a slide. Moreover, upside momentum has waned, and the currency pair is capped by uptrend resistance. On the other hand, it trades above the 50, 100, and 200 Simple Moving Averages.

Support awaits at 1.11, which held euro/dollar down last week. The next level to watch is 1.1065, a support line earlier this week, which converges with the 200 SMA. Next, we find 1.1050 – the confluence of the 50 and 100 SMAs, followed by 1.1030, which held the pair down last week. November's low of 1.0980 is next.

Resistance is at 1.1115, Thursday's high. Next, we find 1.1130, a support line from early November, and 1.1180 – a critical double top.

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