EUR/USD bulls move out as market correct with a focus on US jobs data

EUR/USD was ending the day higher by some 0.28% following a move from 1.0145 to 1.0254 the high for the day as US stocks headed in for the best month since late 2020 in a risk-on environment. In turn, the US dollar was sliding, bleeding out from a dovish tilt at the Federal Reserve and perceived softening in sentiment on the part of policymakers.

US Gross Domestic Product had shrunk 0.9% last quarter, which also weighed on both US yields and the greenback as this data added to a 1.6% contraction in the quarter before that. Last week the US Federal Reserve raised its policy rate by 75bp for the second consecutive meeting and Chair Powell was noting the Fed could slow the pace of its hike at future meetings.

Meanwhile, Eurozone GDP growth beat expectations, rising 0.7% for the second quarter (exp: 0.2%, prev: 0.5%), in spite of German growth stalling, as France and Spain beat expectations. However, given the energy supply pressures facing the continent, traders may wish to focus on those implications instead.

NFP in focus

Elsewhere, markets shrugged off data suggesting slightly stronger-than-expected inflationary pressures in the US and perhaps the main focus now will be this week's critical Nonfarm Payrolls jobs data. US employment likely continued to advance firmly in July, analysts at TD Securities said, but at a more moderate pace after four consecutive job gains at just below 400k in March-June. ''High-frequency data, including Homebase, still point to above-trend job creation. We also look for the UE rate to stay at 3.6% for a fifth straight month, and for wage growth to remain steady at 0.3% m/m (4.9% YoY).''

Meanwhile, with this week's PMIs, US surveys already released point to further deceleration for both manufacturing and services activity in July, as both hard data and sentiment measures have continued to worsen in recent months (particularly the flash estimate for the July services PMI).'' While we are looking for a decline in both ISM surveys, we expect them to remain above the 50 mark which would still signal expansion,'' analysts at TD Securities said. 

EUR/USD technical analysis

The hourly W-formation is pulling in the price towards the neckline for the open, so we could see bulls move in at a discount for the sessions ahead at the start of the week.