- EUR/USD has tumbled down in response to a trio of upbeat US figures and taper speculation.
- All eyes are on US Nonfarm Payrolls, which could fall short of elevated estimates.
- Friday's four-hour chart is showing the currency pair is near oversold conditions.
High expectations, bitter disappointment? The story of April's Nonfarm Payrolls may repeat itself in May, at least for the US dollar. The greenback has been benefiting from robust US data pointing to accelerating job gains and also a pickup in inflation.
ADP reported a leap of 978,000 private-sector jobs. While that is the most direct hint toward the official NFP, the correlation between the payrolls company's figures and the ones coming out from the government has been mixed since the pandemic broke out.
Another reason to expect a somewhat subdued jobs report comes from the employment component of the ISM Services Purchasing Managers' Index. Similar to the Manufacturing PMI published earlier in the week, it showed a slowdown in hiring. The third promising piece in the trio, the fall in jobless claims below 400,000, is for the week ending May 28 – after NFP surveys were conducted.
Nonfarm Payrolls are set to show a leap of 664,000 positions in May, far above 266,000 initially reported for April. It is essential to note that the NFP will likely consist of substantial revisions. Even with a robust number for May on top of an improved figure for April, the Fed will still likely assess that at least seven million people have yet to return to their pre-pandemic jobs.
See
- US Nonfarm Payrolls May Preview: Questions, questions needing answers
- US May Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
Are the dollar's gains unjustified? Not at all, as the greenback has rightfully been benefiting from the evidence of inflation in ISM's surveys and by the Federal Reserve's baby steps toward tapering down its current pace of buying $120 billion worth of bonds every month. However, the NFP could provide an opportunity to sell the dollar before the next rise.
Time for a taper tantrum? Three reasons why the dollar is set to extend its gains
On the other side of the pond, the euro remains supported by the rapid drop in COVID-19 cases in the old continent, but that is mostly priced into the euro. The EU is preparing to auction its new bonds to fund its special aid package.
European Central Bank President Christine Lagarde is set to speak alongside Fed Chair Jerome Powell ahead of the US jobs report, but their topic of the day is climate change, something the markets ignore.
All in all, it is almost exclusively all about the NFP, which will likely fail to meet sky-high estimates and trigger a downside dollar correction.
EUR/USD Technical Analysis
Euro/dollar is suffering from downside momentum on the four-hour chart and has dropped below the 200 Simple Moving Average. However, the Relative Strength Index is nearing the 30 mark, and falling below that level would put the pair in oversold territory.
Some support awaits at the daily low of 1.2105, followed by 1.2055, a cushion from mid-May, and then 1.2015, 1.20 and 1.1945.
Some resistance is at the daily high of 1.2130, followed by 1.2160, 1.2175 and 1.22, which played a role in EUR/USD's trading in recent weeks.
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 extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.