EUR/USD breaks lower after NFP numbers beat estimates

• The EUR/USD pair falls after the publication of Non-Farm Payrolls data, which shows the creation of 303,000 new jobs.
• Economists expected only 200,000 new jobs. The US dollar appreciated on the news.
• Tensions in the Middle East drive up oil prices, which has an impact on global inflation.
• Fed authorities hesitate on the timing of the first interest rate cut, data from German factories weighs.

The EUR/USD pair broke lower and touched 1.0800 on Friday, after the release of US Non-Farm Payrolls (NFP) data beat expectations. Data showed that the US economy added 303,000 new jobs in March, compared to the 200,000 expected by economists. February's result of 275,000, meanwhile, was revised down to 270,000.

The data also showed a drop in the US unemployment rate to 3.8% from 3.9% previously. Economists did not expect changes.

These better-than-expected data indicate that the US economy remains in good shape. This means inflation will remain stubbornly high and reduces the chances that the Federal Reserve (Fed) will see fit to cut interest rates in June, as previously expected.

Another key component of the report, average hourly earnings, was unchanged, showing an increase of 4.1% annually and 0.3% monthly, according to data from the Bureau of Labor Statistics on Friday.

EUR/USD: Declines due to inflationary risks

EUR/USD was already trading down one tenth before the release of German industrial orders data on Friday, which saw a sharp decline to an annual rate of 10.6% in February, down from a decline of 6.2%. from January.

German factory orders data showed orders rising 0.2% in the same period, below economists' estimates of 0.8% but recovering from the 11.4% drop recorded in January.

Rising tensions in the Middle East are driving up the price of oil, with Brent crude trading above $90 a barrel. This is likely to be passed on to general inflation, fueling the thesis of policy makers who are pushing to keep interest rates high.

Minneapolis Federal Reserve (Fed) President Neel Kashkari has raised the possibility that the Fed will not cut interest rates in 2024 if inflation remains at current levels.

“If inflation continues to move sideways, I wonder if we should cut rates this year,” Kashkari said, despite admitting that he had planned two rate cuts this year.

Maintaining higher interest rates is positive for the US dollar as it increases foreign capital inflows.

There appears to be greater consensus among Eurozone rate-setters to move forward with the proposed interest rate cut in June, a factor weighing on the Euro (EUR).

The decision is likely to depend on whether wage data released before the June meeting shows a decline in wage inflation.

Technical analysis: EUR/USD without a clear direction

EUR/USD rose as high as the 100-day SMA at 1.0874 on Thursday, before reversing and closing flat on the day.

In the process, a Gravestone Doji candlestick pattern formed, with potentially bearish implications if followed by a bearish red candle on Friday.

EUR/USD Daily Chart

The short-term trend is unclear, with balanced risks. The 50-day SMA offers support at 1.0827.

A decisive break above the Doji candlestick's high at 1.0876 would neutralize its bearish implications and solidify the case for a short-term uptrend and indicate the likelihood of higher prices. The March 21 high at 1.0942 could be the next target.

Alternatively, if the downtrend continues, a pullback to the support of the previous wave B lows at 1.0798 is possible.