|

EUR/USD tumbled in late trading, yet printed 0.61% gains for the week

  • EUR/USD hovers around 1.0900 after hitting a low of 1.0876.
  • US Nonfarm Payrolls rose below forecast but cemented the case for a 25 bps Fed rate hike.
  • ECB’s Knot: Further rate hikes need, and no rate cuts in 2023.

The EUR/USD falls during the North American session and retraces towards the 1.0900 figure after a solid US Nonfarm Payrolls report. However, the Euro (EUR) is set to finish the week with decent gains of 0.61%, though it ended short of reclaiming 1.1000. At the time of writing, the EUR/USD is trading at 1.0910, below its opening price by 0.07%.

EUR/USD clings to 1.0900 on mixed US jobs data

The US economic docket featured March’s jobs report, revealed by the US Department of Labor. Payrolls rose below estimates of 240k and hit 236K, but the data insights triggered a jump in odds for a US Federal Reserve’s (Fed) 25 bps rate hike. The Participation Rate jumped to 62.6%, from 62.4% foresaw, and the Unemployment Rate remained unchanged at 3.6% YoY. Average Hourly Earnings fell to 4.2% annually basis, beneath the consensus.

Therefore, US Treasury bond yields extended their gains, with the 2-year US T-bond yield, the most sensitive to interest rates, climbing 16 basis points. The Fed swaps are repricing the May monetary policy meeting, with odds for a 25 bps rate hike by the US Federal Reserve itching up, to 67.0%, compared to Thursday’s 49.2%, as shown by the CME FedWatch Tool.

Even though the European (EU) economic docket was absent, Klas Knot, an European Central Bank (ECB) Governing Council Member, had crossed the wires. Knot commented the ECB is not done with interest rate hikes, as core inflation remains at 6%, three times the ECB’s 2% target.

“The only question is whether you still need to take a further step up by half a percentage point, like the last few times we raised rates, or can you already scale back to smaller increments of a quarter of a percentage point,” he said.

When asked about cutting rates towards the year’s end, Knot described such a scenario as “almost impossible.”

Meanwhile, Worldwide Interest Rate Probabilities (WIRP) show odds for a 25 bps rate hike by the European Central Bank at 90%. Following that, another 25 bps rate increase is expected, and no movement for Q4.

What to watch?

The EU’s docket will feature Retail Sales, Industrial Production, Germany’s inflation, and a round of ECB speakers throughout the week. On the US front, the calendar will feature the Consumer and the Producer Price Index (CPI/PPI) for March, the FOMC’s last meeting minutes, Jobless Claims, and Retail Sales on the data side. The Fed parade will continue during the week.

EUR/USD Technical Levels

EUR/USD

Overview
Today last price1.0911
Today Daily Change-0.0012
Today Daily Change %-0.11
Today daily open1.0923
 
Trends
Daily SMA201.079
Daily SMA501.0734
Daily SMA1001.0674
Daily SMA2001.035
 
Levels
Previous Daily High1.0938
Previous Daily Low1.0884
Previous Weekly High1.0926
Previous Weekly Low1.0745
Previous Monthly High1.093
Previous Monthly Low1.0516
Daily Fibonacci 38.2%1.0917
Daily Fibonacci 61.8%1.0905
Daily Pivot Point S11.0892
Daily Pivot Point S21.0862
Daily Pivot Point S31.0839
Daily Pivot Point R11.0946
Daily Pivot Point R21.0968
Daily Pivot Point R31.0999
 

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Week ahead: Rate hike bets face a crucial data week
Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.
CFTC Report: Defensive currency positioning takes hold
The week in one sentence: Sterling and Euro shorts deepened in the week to September 22, while Yen longs were cut sharply. Oil positioning improved despite a steep price decline, and Gold exposure remained crowded. The main signal was a more defensive currency positioning backdrop.
Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.