- The strong US Non-Farm Payrolls report for March drives the Dollar higher, impacting EUR/USD.
- Mixed economic indicators for the Eurozone, including German factory orders and retail sales, contrast with the strong employment outlook in the US.
- EUR/USD continues to decline as the technical aspect suggests that it could fall below the 1.0800 threshold.
The Euro registers minimal losses of 0.13% after the publication of a stronger than expected employment report in the United States (US) that boosted the Dollar, sending EUR/USD lower. At the time of writing, the pair is trading at 1.0822 after reaching a daily high of 1.0847.
EUR/USD Falls as Encouraging US Labor Market Data Boosts US Dollar
On Friday, the US Bureau of Labor Statistics (BLS) revealed that the economy added more jobs than expected. March Nonfarm Payrolls increased by 303,000 jobs, exceeding estimates and previous readings of 200,000 and 270,000 jobs. Other data showed the unemployment rate fell from 3.9% to 3.8%, while average hourly earnings were in line with consensus.
Following the data, the US Dollar strengthens and the Dollar Index (DXY) rises to 104.36. US Treasury yields rise between 4.5 and 5 basis points. The 10-year US Treasury bond yield stands at 4.365%.
On the other hand, Richmond Fed President Thomas Barkin commented that the response was quite strong and added that the reduction in inflation has been uneven. Previously. Susan Collins of the Boston Fed provided comments, but not on monetary policy.
Across the pond, Factory Orders in Germany improved in February, to 0.2%, improving on the -1.4% drop in January. On the other hand, Eurozone (EU) retail sales fell -0.5% monthly, worse than the estimated contraction of -0.4%.
Taking these factors into account, the EUR/USD pair retreated below the 200-day moving average (DMA). Traders' attention is focused on next week's data, with the release of US inflation data and consumer sentiment. On the EU front, the European Central Bank (ECB) will hold its monetary policy meeting, which will be the highlight of the week.
EUR/USD Price Analysis: Technical Outlook
The formation of an “evening star” chart pattern could pave the way for a drop below the 1.0800 figure. Momentum on EUR/USD is tilted lower as the Relative Strength Index (RSI) points lower and below the 50-midline level. A break below 1.0800 will expose the April 2 low at 1.0724, ahead of 1.0700. On the other hand, buyers will face resistance at the confluence of the 50 and 200 DMAs around 1.0828/32.
Frequently asked questions about the Euro
What is the Euro?
The Euro is the currency of the 20 countries of the European Union that belong to the euro zone. It is the second most traded currency in the world, behind the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of more than $2.2 trillion per day.
EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2% ).
What is the ECB and how does it influence the Euro?
The European Central Bank (ECB), headquartered in Frankfurt, Germany, is the reserve bank of the euro zone. The ECB sets interest rates and manages monetary policy
The ECB's main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – tend to benefit the Euro and vice versa.
The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone's national banks and six permanent members, including ECB President Christine Lagarde.
How do inflation data influence the value of the Euro?
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), are important econometric data for the euro. If inflation rises more than expected, especially if it exceeds the 2% target set by the ECB, it is forced to raise interest rates to bring it back under control.
Relatively high interest rates compared to their peers tend to benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
How do economic data influence the value of the Euro?
Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment, but it may encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall.
The economic data for the four largest economies in the eurozone (Germany, France, Italy and Spain) are especially significant, as they represent 75% of the eurozone economy.
How does the trade balance affect the Euro?
Another important release for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period.
If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers wishing to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
