EUR/USD bears seeking a break and firm close below 1.05 on strong NFP

At 1.0536, EUR/USD is down flat in the Tokyo session while the Nikkei is lower by some 0.7% on the heels of a blood bath in global stocks overnight. The euro was sold off heavily.

The price dropped from a high of 1.0641 to a low of 1.0492 on Thursday, the day after the Fed hiked rates by 50bps but dialled down the sentiment of a more aggressive tightening of 75bps. Following an initial drop, the US dollar was soaring at the start of the North American shift. The euro was subsequently sold off and in the wake of damaging data from the eurozone and ongoing concerns over the Ukraine crisis, the bears piled in. 

Overall, Chinese PMIs that remain in contraction territory and the COVID lockdowns that are disrupting supply chains combined with the contagion of the Ukraine crisis in commodity markets have left a dark cloud over global growth prospects and the eurozone. 

Additionally, the Bank of England warned of stagflation while it raised rates by 25bps. ''Shockingly, the BoE is now forecasting inflation at 10.25% YoY in Q4 this year, up from its earlier estimate of 5.75%, on utility costs,'' analysts at ANZ Bank explained. 

''In a particularly pointed example of what is a common global theme, inflation is causing a “real income shock” – with average earnings growth not keeping pace with inflation, real personal consumption will inevitably slow sharply.''

''In fact, the BoE forecast all components of domestic demand to decelerate throughout this year and into next.'' 

Domestically, German data that was showing that industrial orders in March suffered their biggest monthly drop since last October hammered down the coffin for the euro on Thursday. 

DXY, an index that measures the greenback vs. six rivals, is currently trading at 103.486after rallying from a low of 102.352 to a new cycle high of 103.942. 

The NFP showdown

Looking ahead for the day, it is all about Nonfarm Payrolls, NFP.

''US Nonfarm Payrolls are expected to continue reflecting healthy gains in employment growth in March keeping the unemployment rate near its lows,'' analysts at Westpac said.

''The historically tight labour market should continue to support average hourly earnings. The FOMC’s Williams, Kashkari and Bostic are all due to speak at different events.''