EUR/USD Facing Key Support Ahead of NFP Report That Could Boost Volatility

 

The immediate trend in EUR/USD remains bearish as the end of a busy week approaches, and Forex traders will still have to deal with a release that could have a decisive impact on the Dollar this Friday.

Indeed, today's economic calendar will see the release of the NFP job creation report for July, which could help sharpen the currently unclear expectations for the next Fed meeting.

The NFP report could have a decisive impact on EUR/USD this Friday

Indeed, remember that the Fed announced a 0.25% increase in its key rate last week while providing unclear indications in favor of a pause in rate hikes for the next meeting in September.

However, investors are still factoring in a significant 17.5% chance that the Fed will eventually decide to raise rates again, according to the CME's FedWatch tool. However, today's NFP report will be the first of a few key indicators likely to significantly impact expectations between now and the next Fed meeting.

It should therefore be noted that the consensus of economists is counting on 200k job creations, down from 209k last month, for a stable unemployment rate of 3.6% and an average hourly wage up by 4.2% (against 4.4% previously) in annual data, and by 0.3% (vs. 0.4% previously) month on month.

Stronger-than-expected numbers, with, for example, more than 230k job creations, 4.4% annual wage growth, or a falling unemployment rate, could skyrocket expectations of a further increase in the Fed rate.

In this case, we should expect a strengthening of the Dollar, with the key to a mechanical downward impact on the price of the EUR/USD. Conversely, an NFP report with job creation below the consensus, lower-than-expected wages, and/or an increase in the unemployment rate should penalize the greenback in favor of the Euro Dollar.

Finally, we note that it will be less busy than the previous two and will still be the occasion for a significant statistic, with US inflation data for July on Thursday afternoon.

The Euro Dollar trend remains bearish, but the currency pair has crucial support.

From a technical analysis perspective, although the immediate trend in EUR/USD remains bearish, some indices leave the door open for a rebound.

In particular, note that the 100-day moving average, currently at 1.0918, precisely halted EUR/USD's fall yesterday and is still immediate support for the currency pair.

Suppose the Euro Dollar breaks below this 100-day MA and a fortiori below the psychological threshold of 1.09. In that case, it will be necessary to consider the risk that the currency pair will continue to fall to the lower limit of the bullish channel visible from the beginning of the year (in green on the chart), which implies a target towards 1.0830.

Finally, in the event of a rebound in EUR/USD, the primary psychological threshold of 1.10 will be the first potential obstacle before the zone of 1.11, then 1.12, and this year's peak is marked July 14 at around 1.1275.