EUR/USD Forecast: Upbeat NFP could drag euro back below 1.0200

EUR/USD has started to move sideways above 1.0200 after having managed to post strong daily gains on Thursday. Ahead of the US July jobs report, investors refrain from making large bets and the pair could turn bearish in case the dollar capitalizes on upbeat employment figures.

The sharp decline witnessed in the US Treasury bond yields weighed on the greenback on Thursday and opened the door for a decisive rebound in EUR/USD. Although FOMC policymakers have been pushing back against the market view of the Fed abandoning its policy tightening in the second half of 2023, investors are yet to be convinced about the size of the September rate increase. According to the CME Group FedWatch Tool, there is now a 40% probability of a 75 basis points hike at the next policy meeting.

Later in the day, the US Bureau of Labor Statistics will release the labour market data. Analysts forecast Nonfarm Payrolls (NFP) to grow by 250,000 in July following June's better-than-expected increase of 372,000. The Fed acknowledged there was a loss of growth momentum in the US jobs market but reiterated that conditions were still tight. The US central bank also noted that the low unemployment rate and the ongoing expansion in the NFP would allow them to avoid a recession.

In case the NFP print surpasses the market expectation, the dollar should be able to regather its strength and cause EUR/USD to turn south. On the other hand, a disappointing figure could cause market participants to continue to scale down 75 bps September rate hike bets. In that case, the pair could end the week on a firm footing.

EUR/USD Technical Analysis

First technical support seems to have formed at 1.0200, where the 20-period and the 50-period SMAs on the four-hour chart align. If the pair drops below that level and starts using it as resistance, 1.0150 (Fibonacci 23.6% retracement of the latest downtrend) and 1.0100 (psychological level, static level) could be seen as the next bearish targets.

On the other hand, interim resistance is located at 1.0230 (Fibonacci 38.2% retracement) before 1.0260 (100-period SMA). A four-hour close below the latter could be seen as a significant bullish development and trigger another leg higher toward 1.0300 (psychological level, Fibonacci 50% retracement).