News

Jun 07, 2023

EUR/USD Forecast: Euro needs a disappointing NFP to extend recovery

After closing the first three days of the week in negative territory, EUR/USD staged a modest rebound late Thursday. Early Friday, the pair fluctuates in a tight channel at around 1.0950. Mixed

After closing the first three days of the week in negative territory, EUR/USD staged a modest rebound late Thursday. Early Friday, the pair fluctuates in a tight channel at around 1.0950.

Mixed macroeconomic data releases from the US and improvement seen in risk mood caused the US Dollar to lose its strength late Thursday, allowing EUR/USD to edge higher. Early Friday, Euro Stoxx 50 is up 0.5% and US stock index futures trade in the green to help the pair hold its ground.

Nonfarm Payrolls (NFP) in the US are forecast to rise by 200,000 in July following the 209,000 increase recorded in June. Annual wage inflation is expected to edge lower to 4.2% and the Unemployment Rate is seen holding steady at 3.6%.

Federal Reserve (Fed) Chairman Jerome Powell reiterated the data-dependent approach to monetary policy following the July meeting.

Currently, markets are pricing in a 30% probability of the Fed raising its policy rate one more time by 25 basis points before the end of the year. An upbeat NFP print, at or above 250,000, could feed into hawkish Fed expectations and provide a boost to the USD. On the flip side, a weak print close to 150,000 could have the opposite impact on the USD's valuation.

In case NFP comes in close to the market forecast, investors are likely to pay closer attention to wage inflation data. An unexpected increase in annual wage inflation could help the USD stay resilient against the Euro.

EUR/USD holds above the upper limit of the descending regression channel coming from mid-July, currently located at 1.0950, and the Relative Strength Index (RSI) indicator on the four-hour chart edges higher toward 50. These technical developments point to a lack of seller interest but don't point to a buildup of recovery momentum yet.

A four-hour close below 1.0950 could bring in additional sellers and open the door for an extended slide toward 1.0900 (psychological level, mid-point of the descending channel) and 1.0860 (lower limit of the descending channel).

If 1.0950 is confirmed as support, 1.1000 (psychological level, Fibonacci 61.8% retracement of the latest uptrend) could be set as next recovery target before 1.1020 (200-period Simple Moving Average) and 1.1050 (Fibonacci 50% retracement).

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.