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EUR/USD Forecast: US Nonfarm Payrolls will test bulls' commitment

  • EUR/USD holds steady at around 1.1750 in the European morning on Tuesday.
  • US Nonfarm Payrolls data could trigger the next big action in the pair.
  • The technical outlook suggests that EUR/USD remains bullish in the short term.

EUR/USD struggled to gather directional momentum on Monday and closed the day with marginal gains. The pair stays quiet early Tuesday and continues to move sideways at around 1.1750.

Euro Price This Month

The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-1.28%-0.89%-0.81%-1.47%-1.24%-0.76%-0.85%
EUR1.28%0.40%0.49%-0.19%0.05%0.53%0.44%
GBP0.89%-0.40%0.35%-0.58%-0.35%0.13%0.04%
JPY0.81%-0.49%-0.35%-0.68%-0.47%0.02%-0.07%
CAD1.47%0.19%0.58%0.68%0.18%0.72%0.63%
AUD1.24%-0.05%0.35%0.47%-0.18%0.48%0.39%
NZD0.76%-0.53%-0.13%-0.02%-0.72%-0.48%-0.09%
CHF0.85%-0.44%-0.04%0.07%-0.63%-0.39%0.09%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Although the US Dollar (USD) had a hard time gathering strength at the beginning of the week, the negative shift seen in risk mood helped it stay resilient against its peers. Early Tuesday, US stock index futures trade deep in negative territory, suggesting that markets remain risk-averse.

In the second half of the day, the US Bureau of Labor Statistics (BLS) will publish Nonfarm Payrolls (NFP) data for October and November. Markets expect the NFP to rise by 40,000 in November and see the Unemployment Rate staying unchanged at 4.4%.

In case the November NFP print offers a significant upside surprise, with a reading at or above 100,000, investors could see that as a factor that could delay Federal Reserve (Fed) rate cuts next year. In this scenario, the USD is likely to stage a decisive rebound with the immediate reaction and cause EUR/USD to turn south. Conversely, a disappointing reading could feed into a January Fed rate cut expectations and open the door for another leg higher in EUR/USD.

According to the CME FedWatch Tool, markets are currently pricing in about a 25% probability of a 25 basis points reduction in the policy rate in January.

Chart Analysis EUR/USD

EUR/USD Technical Analysis:

The 20-period Simple Moving Average (SMA) climbs above the 50- and 200-period SMAs, with all three rising. Price holds above these measures, keeping the near-term bias upward. The 20 SMA at 1.1737 offers nearby dynamic support. The mid-point of the ascending regression channel also reinforces this support. The Relative Strength Index (RSI) stands at 62.5, bullish but not overbought, with momentum easing slightly from earlier highs.

On the upside, the upper limit of the ascending channel aligns as the first resistance level at 1.1790, followed by 1.1840 (static level). Looking south, the lower limit of the ascending channel and the 50-period SMA form a key support area at 1.1690-1.1680.

The rising trend line from 1.1500 underpins the bullish bias, offering the next support level at 1.1670. Sustained bids above 1.1740 would keep the topside in play toward 1.1840. A drop beneath 1.1690-1.1670 region could open the door for an extended decline toward 1.1620 (static level).

(The technical analysis of this story was written with the help of an AI tool)

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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