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EUR/USD pares Wednesday’s gains and falls below 1.0600

  • The EUR/USD pair falls below 1.0600, while the US bond yield remains above 4%.
  • US jobs data reiterated the tightness of the labor market, justifying further action by the Fed.
  • EUR/USD Price Analysis: Neutral bias, although it is close to the 100 and 200 DMAs.

He EUR/USD loses traction in the middle of the North American session and trades below its opening price by 0.83%, below 1.0600. Reasons such as the reduction in unemployment claims in the United States have provoked the reaction of investors, that perhaps their view of inflation is wrong, which has triggered the yield of US bonds. Hence, the US dollar (USD) strengthened at the expense of the euro (EUR). At the time of writing, the EUR/USD pair was trading at 1.0575.

The US Department of Labor (DoL) revealed that the number of people filing for unemployment benefits for the first time in the week ending February 25 was 190,000, lower than the 195,000 forecast by experts. The market reacted negatively, pushing US Treasury yields above the 4% threshold and supporting the dollar.

The EUR/USD pair dipped below 1.0600 in initial reaction to the initial US jobless claims data, while the dollar rallied. As of this writing, the Dollar Index (DXY), which measures the value of the dollar against a basket of six currencies, is up 0.73% to 105,141.

In the euro zone, inflationary figures were released. The Harmonized Index of Consumer Prices (HICP) rose 8.5% year-on-year, up from 8.6% the previous month. However, market expectations were disappointed (8.2%). Excluding the volatile elements, the so-called subjacent inflation, in its annual reading, stood at 5.6%, above the previous and expected 5.3%.

Although the figures were higher than expected, investors had already discounted a 50 basis point rate hike by the European Central Bank (ECB), as announced by its President, Christine Lagarde, at the press conference at her last meeting. However, the latest data has divided those responsible for the ECB on the signal that the entity should send to the markets.

Meanwhile, the Federal Reserve (Fed) and the ECB are expected to raise rates. The former is likely to rise 25 basis points, as money market futures show, but other data to be released before the March meeting could put a 50 basis point rate hike in discussion. On the European side, the ECB is leaning towards 50 basis points, although the latest data could open the door for higher rates.

EUR/USD Technical Analysis

After rallying towards the weekly high of 1.0691, EUR/USD plunged, erasing almost all of its gains from Wednesday. EUR/USD collided with the 20 and 50 day EMAs at 1.0664 and 1.0657 respectively, and has hit a daily low of 1.0576. Despite the fact that the EUR/USD pair turned south, its bias remains neutral, but a daily close below 1.0600 could pave the way for further decline.

Therefore, the first support for EUR/USD would be the daily low for March 2 at 1.0576. Break below, and the 100 day EMA at 1.0550 would be tested by sellers before falling to the 200 day EMA at 1.0533. Conversely, the first resistance for EUR/USD would be the psychological level of 1.0600. Once conquered, the Euro could appreciate towards the confluence of the 50/20 day EMAs at 1.0657/1.0665, followed by a test of 1.0700.

What is there to watch out for?

Source: Fx Street

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