- EUR/USD has started the new week on a bearish note.
- US Dollar preserves its strength following the upbeat May jobs report.
- A four-hour close below 1.0680 could bring in additional sellers.
EUR/USD has continued to stretch lower and dropped below 1.0700 after having declined sharply late Friday. The pair's technical outlook suggests that the pair could extend its slide in case 1.0680 support fails.
The US Bureau of Labor Statistics reported ahead of the weekend that Nonfarm Payrolls (NFP) in the US rose 339,000 in May. This print came in much higher than the market expectation of 190,000 and helped the US Dollar (USD) outperform its rivals during the American trading hours on Friday. Although the CME Group FedWatch Tool shows that markets are still pricing in a nearly 70% probability of the US Federal Reserve (Fed) leaving its policy rate unchanged in June, the USD holds its ground at the beginning of the week.
Later in the day, the ISM will release the Services PMI report for May. After the ISM Manufacturing PMI showed an unexpected drop in the inflation component, the Price Paid Index, the US Dollar struggled to find demand. Hence, a similar reaction could be witnessed in case the Prices Paid Index of the ISM Services PMI survey, which is forecast to edge lower to 57.8 from 59.6 in April, declines toward 50. The headline PMI is expected to retreat to 51.5. A reading below 50 could also weigh on the USD while an increase should have the opposite impact on the currency's valuation.
Meanwhile, US stock index futures trade mixed and the Euro Stoxx 50 Index stays flat in the European session. A noticeable negative shift in risk sentiment could provide an additional boost to the USD and cause EUR/USD to push lower and vice versa.
It's also worth noting that European Central Bank (ECB) President Christine Lagarde will speak at the Hearing before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels. Lagarde reiterated last week that they need to continue to raise rate until they are confident that inflation will return to target. A similarly hawkish tone could help the Euro show some resiliency against its peers.
EUR/USD Technical Analysis
EUR/USD broke below the 20 and the 50-period Simple Moving Averages (SMA) on the four-hour chart and the Relative Strength Index (RSI) indicator on the same chart dropped below 50, reflecting the bearish bias in the short term.
The upper-limit of the descending regression channel aligns as immediate support at 1.0680. In case EUR/USD returns within that channel by confirming that level as resistance, 1.0650 (mid-point of the channel, end-point of the latest downtrend) aligns as strong support before bears could target 1.0600 (psychological level, lower-limit of the descending channel).
On the upside, a four-hour close above 1.0720 (50-period SMA) could discourage sellers. In that scenario, 1.0750 (Fibonacci 23.6% retracement level of the latest downtrend) and 1.0780 (100-period SMA) align as next hurdles.
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.
Recommended Content
Editors’ Picks
EUR/USD recovers toward 1.0400 as USD rally loses steam
EUR/USD recovers from daily lows toward 1.0400 in the American session on Tuesday. Following the earlier rally, the USD struggles to preserve its strength as the bullish opening in Wall Street's main indexes point to an improving risk mood.
GBP/USD stays below 1.2300 after UK employment data
GBP/USD rebounds from session lows but remains below 1.2300 in the second half of the day on Tuesday. The US Dollar clings to modest gains but finds it difficult to gather further bullish momentum as the impact of Trump's tariff threats fade.
Gold climbs to fresh multi-month high above $2,730
Gold gathers bullish momentum and trades at its highest level since early November above $2,730 on Tuesday. The benchmark 10-year US Treasury bond yield is down more than 1% below 4.6% following US President Trump's tariff threats, helping XAU/USD push higher.
Bitcoin fails to sustain the $109K mark after Trump’s inauguration
Bitcoin’s price steadies above the $102,000 mark on Tuesday after reaching a new all-time high of $109,588 the previous day. Santiment’s data shows that BTC prices quickly corrected, as social media showed major greed and FOMO among the traders in Bitcoin after President Donald Trump’s inauguration.
Prepare for huge US trade changes as Trump goes America first
You can be sure that big changes are coming as far as US trade is concerned, even if we didn't get any new tariffs on President Trump's first day in office. A comprehensive investigation into US trade relationships was initiated via a memorandum. China, Canada, and Mexico are clearly in the immediate firing line.
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.