EUR/USD surrenders intraday gains and slides below 1.1100 after posting a fresh weekly high of 1.1150 in Friday's North American session. Decent gains in the shared currency pair have waned due to a firm recovery in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to nearly 101.40 after reversing intraday losses.
While the near-term appeal of the US Dollar remains uncertain as the United States (US) Nonfarm Payrolls (NFP) data came in lower-than-expected for August. The report showed that US employers hired 142K job-seekers, lower than estimates of 160K but higher than July’s reading of 89K, downwardly revised from 114K. The Unemployment Rate declined to 4.2%, as expected, from the former release of 4.3%.
The appeal of the US Dollar was already weak as US JOLTS Job Openings data for July and the ADP Employment data for August, released earlier this week, deepened fears of deteriorating labor market conditions. Fresh job vacancies and additions of payrolls in the private sector stood at 7.67 million and 99K, respectively, the lowest in more than three-and-a-half years.
The US ISM Services Purchasing Managers’ Index (PMI) data for August came in better than projected but failed to cushion the US Dollar.
Signs of slowing labor demand have prompted market expectations that the Federal Reserve (Fed) could start cutting interest rates aggressively. According to the CME FedWatch tool, the possibility for the Fed to begin reducing interest rates by 50 basis points (bps) to 4.75%-5.00% has increased to 43% from 34% recorded a week ago.
Meanwhile, the US Average Hourly Earnings data, a key measure of wage growth that influences consumer spending, increased at a faster-than-expected pace in August. Earnings have accelerated to 3.8% from the estimates of 3.7% and from 3.6% in July on a year-on-year basis. The wage growth measure rose at a stronger pace of 0.4% against expectations of 0.3% and the prior release of 0.2% on the month.
EUR/USD fails to hold gains above the round-level figure of 1.1100. However, the near-term outlook of the major currency pair remains firm as it manages to gain firm footing near the 20-day Exponential Moving Average (EMA) around 1.1055.
The longer-term outlook is also bullish as the 50-day and 200-day EMAs at 1.0970 and 1.0865, respectively, are sloping higher. Also, the shared currency pair holds the Rising Channel breakout on a daily time frame.
The 14-day Relative Strength Index (RSI) has declined below 60.00 after turning overbought near 75.00.
On the upside, the recent high of 1.1200 and the July 2023 high at 1.1275 will be the next stop for the Euro bulls. Meanwhile, the downside is expected to remain cushioned near the psychological support of 1.1000.
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