|

EUR/USD is vulnerable to a solid Non Farm Payrolls event

  • EUR/USD sits tight ahead of the all-important NFP report schedule for the US session.
  • Bears are looking for a weekly bearish close on a solid NFP report. 

Risk appetite remained firm on Thursday following the Bank of England's surprise hold which led to yield curves shifting lower across geographies as traders stepped off the peddle with respect to interest rate expectations. Nevertheless, EUR/USD fell to a one-month low, falling from 1.1615 to 1.1528. The pair then steadied around 1.1555 into Asia and sits between there and 1.1545 the low so far today in Tokyo. 

The US dollar was on course for a second straight week of gains against major peers on Friday as traders bought the dip in the greenback, expecting a solid outcome from today's showdown in the US Nonfarm Payrolls report that could sway the timing of Federal Reserve interest rate increases.

''Non-farm payrolls should see a strong gain in October (market median f/c +450k, Westpac +500k),'' analysts at Westpac explained. ''The unemployment rate should edge down to 4.7% despite higher participation. Average hourly earnings are meanwhile expected to rise at a robust pace as labour shortages continue to support wage growth.''

The dollar index DXY, which measures the greenback against a basket of six rivals, climbed from the post-Federal Reserve meeting lows of 93.82 to a high of 94.47 and rallied 0.51% on Thursday. That lifted it into the positive for the week, so far, adding 0.21%.

Central bank sentiment weighs on EUR/USD

Overall, investors have been forced to reset monetary policy expectations this week, after some of the biggest central banks knocked back bets for early rate hikes which have helped support the greenback. For instance, the European Central Bank President Christine Lagarde pushed back on Wednesday against market bets for a rate hike as soon as next October and said it was very unlikely such a move would occur in 2022.

Also on Wednesday, Fed Chair Jerome Powell said he was in no rush to hike borrowing costs, even as the Federal Open Market Committee announced a $15 billion monthly tapering of its $120 billion in monthly asset purchases. Nevertheless, should the data impress on Friday, amongst a sold backdrop of PMIs this week, the greenback could remain on the front foot for the foreseeable future and weigh on EUR/USD. 

EUR/USD technical analysis

In line with the fundamentals, the signal currently is technical under pressure as well:

From a weekly perspective, the price is in the running for a bearish close as illustrated above. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.

Crypto Today: Bitcoin, Ethereum, XRP pare gains despite increasing hopes of upcoming Fed rate cut

Bitcoin is steadying above $91,000 at the time of writing on Friday. Ethereum remains above $3,100, reflecting positive sentiment ahead of the Federal Reserve's (Fed) monetary policy meeting on December 10.

Week ahead – Rate cut or market shock? The Fed decides

Fed rate cut widely expected; dot plot and overall meeting rhetoric also matter. Risk appetite is supported by Fed rate cut expectations; cryptos show signs of life. RBA, BoC and SNB also meet; chances of surprises are relatively low.

Ripple faces persistent bear risks, shrugging off ETF inflows

Ripple is extending its decline for the second consecutive day, trading at $2.06 at the time of writing on Friday. Sentiment surrounding the cross-border remittance token continues to lag despite steady inflows into XRP spot ETFs.