After the US employment data revealed that Nonfarm Payrolls increased by 531,000 in October, exceeding the market expectations of 425,000, the Euro/Dollar came under fresh bearish strain and fell to its worst level since 2021 under 1.1520 on Friday.
EUR/USD CHART SOURCE: Tradingview.com
When looking at the four-hour chart of the EUR/USD, the Relative Strength Index (RSI) gauge remains below 50, indicating that the recent comeback is merely a technical recovery. If the pair does not manage to complete the week above 1.1620, further losses may be seen shortly.
In terms of support on the negative, the first level of support is situated around 1.1525 (2021 bottom), followed by 1.1500 (psychological level) as well as 1.1440. (previous resistance, stationary level). The 1.1670 opposition level corresponds to the 200-period simple moving average, the 100-period simple moving average, and the Fibonacci 23. percent retracement of the September decline (Fibonacci 38.2 percent retracement, static level).
Overview Of The Fundamentals
The EUR/USD lost its appeal on Thursday as investors struggled to find a rationale to hang onto the common currency in the face of a clear monetary policy difference between the Federal Reserve of the United States and the European Central Bank of the European Union (ECB). Prior to the Federal Reserve’s announcement on Wednesday that it would reduce its bond-buying by $15 billion per month, numerous officials reassured the markets that there was no urgency to raise interest rates in 2022.
Meanwhile, according to the CME Group’s FedWatch Tool, there is only a 35% likelihood that the Federal Reserve’s policy rate will remain constant by June of 2022. In the meantime, it appears that investors aren’t paying attention to the data coming out of the Eurozone at this time. German industrial production and industrial orders for September came in better than expected on an annual basis, but these data did not help the common currency gain traction in the market.
Later in the afternoon, Eurostat released data on retail sales for September. It would be unexpected if the October employment report from the United States caused a significant market reaction before the release of the report. According to expectations, the number of nonfarm payrolls (NFP) in the United States would climb by 425,000 in October, following a dismal gain of 194,000 in September.
On Wednesday, Federal Open Market Committee Chairman Jerome Powell stated that the labor market must continue to improve for the Fed to raise interest rates. However, while a single positive NFP print is unlikely to change the Fed’s outlook on interest rates, investors may consider an upbeat reading as an incentive to raise their long-dollar bets if the data is positive. On the other side, a weaker-than-expected NFP report might cause Greenback to lose some appeal, but any efforts to rebound in the EUR/USD pair are likely to be hampered by technical difficulties.