Nov 04, 2022
VOT Research Desk
Early on Friday morning in Europe, EURUSD gained strength and moved closer to 0.9800.
The US jobs data for October is expected to have a substantial impact on the US Dollar’s (USD) performance versus its competitors later in the day and determine the pair’s movement in the lead up to the weekend.
The significant increase in the EURGBP cross on Thursday indicated that some of the capital outflows from the British pound were captured by the Euro (EUR) (GBP). Investors saw the Bank of England’s (BOE) statement that the peak rate is expected to be lower than the 5.2% factored into markets as an indication of a less aggressive tightening attitude.
Christine Lagarde, president of the European Central Bank (ECB), stated on Thursday that policy action is required since inflation is still too high. Lagarde continued by saying that they must be watchful for effects of the Federal Reserve’s policy and factor the exchange rate into inflation forecasts.
On Friday, the US dollar is weakening despite an uptick in market sentiment. In the European session, US market index futures are up between 0.4% and 0.9%, suggesting that Wall Street may open up positively.
Later in the day, the October jobs data will be made public by the US Bureau of Labor Statistics. After a better-than-anticipated gain of 263,000 in September, nonfarm payrolls are expected to climb by 200,000.
The Employment Index component of the ISM’s Services PMI survey registered at 49.1 on Thursday, indicating a decline in employment in the service sector. In the event that NFP falls far short of experts’ expectations, the USD is likely to struggle to find demand, which could pave the way for a protracted recovery in the EURUSD.
On the other side, a positive report on the labour market should help the US Dollar regain momentum and make the pair finish the week on the defensive.
EUR/USD Technical Analysis
Prior to 0.9820, EURUSD is encountering temporary resistance at 0.9800 (static level, psychological level) (200-period SMA on the four-hour chart, descending trend line).
In order to draw buyers, a four-hour close above the latter might be interpreted as a positive signal.
The pair may continue to strengthen its rebound toward 0.9860 (100-period SMA) and 0.9900 if the Relative Strength Index (RSI) indicator goes above 50 in response to such a development (psychological level).
On the downside, 0.9700 (a psychological level, static level) appears to have formed short-term support before 0.9630. (Oct. 13 low).
