The dollar is set for a winning week ahead of NFP

European stock markets traded higher on Friday as the positive tone in Asia surrounding China's reopening speculation overshadowed weak German factory orders.

A strong gain in Asian equity markets Friday gave European equities a boost, thanks to renewed speculation that China's COVID-19 control measures will be eased in the near future, which would in turn lift the country's economic activity and open up new export markets for European firms.

As the US jobs report is slated for release on Friday, the dollar edged lower in early European trade Friday. However, it remains on track to gain on a weekly basis after Fed Chair Jerome Powell's hawkish stance at the meeting.

The market has subsequently reined in some of the gains that were made on Friday ahead of the release of key US jobs data later in the day. There is consensus among economists that up to 200,000 jobs will have been added to nonfarm payrolls in October. Another substantial interest rate hike in December would be largely confirmed if data depicting a more robust labour market is released.

During the past month, the US dollar index has been consolidating between 109.50 and 113.50 as traders evaluate the state of the global economy. In addition, traders evaluate whether or not the Federal Reserve will be more aggressive in raising interest rates than its major counterparts in the coming months. Trading the NFP report requires you to choose the right pair based on consolidative price action that does not leave the US dollar with a strong technical bias.

After falling to its lowest level in nearly two weeks overnight, the EUR/USD pair rose to 0.9758 during the morning, rebounding to a degree from the overnight low.

However, these gains have been very tentative after data released on Friday revealed that German factory orders in September decreased by a whopping 4.0% over August's figures. Since March, they have experienced six declines in a row, and this is the biggest decline since then. Consequently, this suggests that Germany, the largest economy in the Eurozone and the main driver of growth, is on the verge of recession.

It is expected that both the composite and services PMI data for the region, which are due later in the session, will show both sectors firmly in contraction territory at this point.