EUR/USD Forecast: Three reasons to rise ahead of horrible Non-Farm Payrolls, volatility set to leap

• EUR/USD has bounced amid three positive developments.
• All eyes are on the US Non-Farm Payrolls, which will likely be catastrophic. 
• Friday's four-hour chart is showing the bears remain in control.

Worst downturn since the Great Depression? No problem for stocks and little love for the safe-haven US dollar. The mood is relatively upbeat ahead of a devastating US jobs report, but EUR/USD still found reasons to rise:

Three reasons for the bounce

1) Negative US rates?: Bond markets have been on the back burner for several weeks, but have returned to the spotlight, as money markets have priced in negative rates in 2021. The prospect of investors paying the government to take their money – seen previously in Europe – has now come to haunt the dollar. Federal Reserve officials have rejected such a move, but speculation remains rife.

2) Sino-American relations: Top negotiations from the world's largest economies held a video conference to take stock of the trade deal, and its implementation. The high-level event calms tensions that had previously supported boosted the greenback.

3)Central bank support: Christine Lagarde, President of the European Central, said on Thursday that she and her colleagues will do whatever is necessary, defying the ruling of the German constitutional court. Judges in Karlsruhe deemed part of the ECB's bond-buying scheme as illegal and weighed on the common currency. Her unequivocal commitment has been supporting the euro.

Lagarde speaks again later on Friday, but the focus will be on a much more significant event.

How terrible are Non-Farm Payrolls?

The US labor market suffered badly in April – worse than any month in the Great Recession and reaching levels of unemployment last seen in the 1930s – the Great Depression. Expectations stand at a loss of some 22 million positions and the headline jobless rate soaring to 14%. However, the unprecedented nature of the lockdowns – necessary to curb the spread of coronavirus – means the range of estimates is exceptionally broad.

The best estimate stands at "only" 8.6 million jobs lost and the worst is at a whopping 30 million. A crash in the participation rate will likely keep the Unemployment Rate tilted to the upside. The loss of many low-paying jobs – which require physical presence – could push Average Earnings higher.

Investors could look beyond the headline numbers and see which sectors were hit most. Falls in restaurant posts and similar positions could prove temporary while broader layoffs could last longer and scar the economy. 

What is priced in? It seems that markets are ready for catastrophic news, allowing the safe-haven dollar to edge lower. However, extremely horrible numbers could boost the greenback and send stocks down. 

See:

• Non-Farm Payrolls Preview: Emotions or facts for the markets
• Nonfarm Payrolls Preview: Outrageous employment collapse priced in?

EUR/USD Technical Analysis

Euro/dollar is trading below the 50, 100, and 200 Simple Moving Averages on the four-hour chart. On the other hand, downside momentum has weakened. OVerall, bulls are in control, but less than beforehand. 

Support awaits at 1.0810, which provided support several times in April. It is followed by Thursday's low at 1.0765. April's trough of 1.0730 and 1.0640 are the next levels to watch.

Resistance is at the recent high of 1.0855, which is also where the 100 SMA hits the price. A stronger cap is 1.0890, which held the pair down in late April and converges with the 200 SMA. Further above, 1.0925 and 1.1975 await EUR/USD.