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).
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EUR/USD holds steady at around 1.0950 early Friday.Nonfarm Payrolls data from the US could drive the pair's action ahead of the weekend.Near-term technical outlook doesn't yet point to a buildup of recovery momentum.