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EUR/USD churns as markets hunker down ahead of Friday NFP print

  • EUR/USD overextended its recent bull run, getting rejected from 1.0850.
  • ECB rate cut forecasts have plummeted, prompting an FX rebalance.
  • US NFP net jobs additions figures loom large on Friday.

EUR/USD tried to stretch for a fourth straight day of gains, but markets are drawing into the middle ahead of Friday’s key US Nonfarm Payrolls (NFP) print. The Euro saw a sharp rejection from the 1.0850 level on Thursday, ending Fiber’s three-day win streak. EUR/USD has had a stellar week, climbing 4.6% bottom-to-top from Monday’s opening bids.

Forex Today: The US Nonfarm Payrolls are coming!

FX markets have sharply rebalanced after rate cut expectations took a tumble this week. According to rate markets, the European Central Bank (ECB) is broadly expected to only cut interest rates one more time in 2025 following Thursday’s 25 bps rate trim. With the Euro facing a much tighter interest rate differential than previously expected, EUR/USD took a hard step higher this week. 

Markets remain hungry for more rate cuts to ease financing and borrowing costs, but still-sticky inflation in the EU (and now the US following a recent uptick in key inflation metrics) has hobbled central banks’ ability to enact rate adjustments.

US President Donald Trump shifted his stance on tariffs once again, revealing a temporary suspension on tariffs for all products encompassed by the USMCA agreement, which he personally negotiated in his first term. Even as the Trump administration continues to retract its previous tariff threats, markets are finding it challenging to regain enough risk appetite to trend upward.

On Friday, US Nonfarm Payrolls (NFP) will take on greater importance as investors closely monitor economic indicators. While the US economy remains generally strong, signs of weakness are emerging in the labor market. Additionally, a fresh wave of inflationary pressures, primarily due to concerns over tariffs, dampens growth forecasts.

EUR/USD price forecast

Thursday’s intraday rejection of the 1.0850 level puts the Fiber’s near-term bull run in the ground, at least for now. EUR/USD easily pierced the 200-day Exponential Moving Average (EMA) at 1.0650 this week, pushing the pair back into the bullish side of the key moving average for the first time since November.

Technical oscillators remain pinned in overbought territory, cautioning against further bullish positioning. However, little technical reason to try and catch a rising knife exist on the chart, outside of a potential rejection play off of an old support/resistance level from mid-October of last year.

EUR/USD daily chart

Euro FAQs

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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