EUR/USD Forecast: Euro could look to extend rebound on a weak US jobs report
- EUR/USD holds steady above 1.0800 following Thursday's pullback.
- Nonfarm Payrolls in the US are forecast to rise 200K in March.
- The pair's near-term technical outlook highlights a loss of bullish momentum.
EUR/USD erased its daily gains and closed flat on Thursday after climbing to its highest level since March 21 above 1.0870. The pair fluctuates in a tight channel below 1.0850 in the early European session on Friday as investors gear up for the US labor market data.
Hawkish comments from Federal Reserve (Fed) officials and the negative shift seen in risk mood helped the US Dollar (USD) stage a rebound in the American session on Thursday.
Minneapolis Fed President Neel Kashkari said that he wonders if the Fed should cut rates at all this year if inflation continues to move sideways. Richmond Fed President Thomas Barking noted that it's "hard to reconcile current breadth of inflation with the progress the Fed needs to see for rate cuts."
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.45% | 0.07% | 0.31% | -0.69% | -0.04% | -0.52% | 0.22% | |
| EUR | 0.44% | 0.51% | 0.74% | -0.25% | 0.41% | -0.08% | 0.65% | |
| GBP | -0.08% | -0.53% | 0.24% | -0.76% | -0.12% | -0.60% | 0.13% | |
| CAD | -0.31% | -0.76% | -0.24% | -1.00% | -0.35% | -0.84% | -0.10% | |
| AUD | 0.69% | 0.27% | 0.78% | 1.01% | 0.67% | 0.19% | 0.90% | |
| JPY | 0.03% | -0.40% | 0.11% | 0.36% | -0.63% | -0.48% | 0.25% | |
| NZD | 0.51% | 0.06% | 0.58% | 0.83% | -0.16% | 0.46% | 0.72% | |
| CHF | -0.23% | -0.65% | -0.13% | 0.09% | -0.93% | -0.25% | -0.72% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Nonfarm Payrolls (NFP) in the US are forecast to rise 200,000 in March and the Unemployment Rate is expected to hold steady at 3.9%. Unless there is a significant revision to February's NFP increase of 275,000, a strong NFP growth of 250,000 or higher could cause markets to refrain from pricing in a rate cut in June and provide a boost to the USD with the immediate reaction. On the other hand, a disappointing print below 200,000 could point to loosening conditions in the labor market and revive optimism about a policy pivot in June.
US March NFP Forecast: Nonfarm payrolls growth set to remain robust, slowing from previous months.
According to the CME FedWatch Tool, markets are currently pricing in a 35% probability that the Fed will leave the policy rate unchanged at 5.25%-5.5% in June.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart started to move sideways slightly above 50, reflecting a lack of bullish momentum. The 200-period Simple Moving Average (SMA) aligns as immediate resistance at 1.0850 before 1.0870 (Fibonacci 61.8% retracement of the latest downtrend) and 1.0900 (Fibonacci 78.6% retracement).
On the downside, the first support is located at 1.0810-1.0800 (psychological level) before 1.0780 (Fibonacci 23.6% retracement) and 1.0720 (end-point of the downtrend).
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
