|

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:

Editor's Picks

AUD/USD falls to near 0.7100 after slipping below 50-day EMA

AUD/USD depreciates after registering minor gains in the previous day, trading around 0.7120 during the Asian hours. The technical analysis of the daily chart shows the pair consolidating sideways within a rectangle pattern, as neither bulls nor bears gain control. The AUD/USD pair is holding a slight bearish tone however as it sits beneath both the nine-day and 50-day EMAs.

160.00: USD/JPY back near intervention territory after upbeat US jobs report

US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added. The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows. Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

Gold targets $4,300 amid stronger Dollar

Gold faces increasing selling interest and navigates the area of three-month lows near the $4,300 mark per troy ounce on Friday. The precious metal’s decline comes as traders assess the stronger-than-expected NFP, while the bid bias in the Greenback and higher US Treasury yields also collaborate with the retracement.

Cardano hits five-year low even as Hoskinson clarifies "break" isn't an exit

Cardano (ADA) price is down 10% at press time on Friday, extending losses over 30% so far this week amid Charles Hoskinson's clarification that "break" isn't an exit.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.