How will EUR/USD proceed in view of the NFP?

2023年10月3日

The EUR/USD pair hit a new yearly low, nearly reaching 1.0450 on Tuesday before a slight bounce to around 1.0480. This drop was driven by a strong US dollar, supported by positive economic data and higher yields. However, the euro has slightly recovered. The daily chart shows a bearish trend with negative prospects below 1.0640.

On the 4-hour chart, the pair is approaching the lower boundary of a descending channel, with 1.0450 as a key level, suggesting potential corrections or consolidations. However, a break below this level could lead to further declines, possibly targeting 1.0400. Resistance is observed around 1.0490 and 1.0520, with a continued downward trajectory below 1.0540. EUR/USD is at multi-month lows due to the strong US dollar and positive US labor market data. The Eurozone is awaiting inflation and retail sales data, while employment reports continue in the USA. Positive US JOLTS Job Opening data on Tuesday pushed the 10-year Treasury bond yield to 4.80%, a sign of a robust economy. More employment data is expected in the coming days, including the ADP employment report, jobless claims, and the official employment report, including Nonfarm Payrolls and the unemployment rate. Favorable numbers in these reports could further boost the dollar's rally. Ongoing strong US economic data supports the US dollar rally, fueled by market expectations of higher long-term interest rates from the Federal Reserve (Fed) and a decreasing market sentiment. On Wednesday, Eurostat will release the Producer Price Index and Retail Sales for August, along with final HICP PMIs. Market participants are speculating that the European Central Bank has reached its terminal rate. Additionally, the price seems to be bouncing right at a demand zone highlighted in a previous analysis, at the level of 1.0450, and false breaks have been made on the lows, namely on the swing lows present in this zone. In case of a strong bullish push, I would look for a M15 entry to go long with a target of 1.0542. Let me know what you think, greetings from Nicola, CEO of Forex48 Trading Academy.