- EUR/USD pulls back on Friday, giving back some of the previous day’s recovery gains.
- The rebound in US bond yields revives demand for the Dollar and puts pressure on the pair.
- Fed rate cut expectations could cap the dollar and offer support to the pair ahead of the US NFP report.
The EUR/USD pair fails to build on the previous day’s modest rebound from the 1.0750 area, the three-week low, and trades with a slight negative bias on Friday. The pair remains below the 1.0800 level during the European session, although it lacks follow-through selling as investors eagerly await the release of US monthly employment data.
The popular nonfarm payrolls (NFP) report will serve to look for more signs that the historically tense labor market is easing, reaffirming the Federal Reserve’s (Fed) dovish expectations. Market participants now appear convinced that the US central bank has ended its monetary policy tightening campaign and are now pricing in a higher likelihood of a 25 basis point rate cut as early as March 2024. Therefore, crucial data will play a key role in influencing the Fed’s policy outlook, which in turn will boost USD demand and provide a significant boost to the EUR/USD pair.
Ahead of key data, further recovery in US Treasury Yields helps the US Dollar (USD) attract some buyers and halt the previous day’s pullback from two-week highs. This, along with the recent dovish rhetoric from European Central Bank (ECB) officials, is seen putting some pressure on the EUR/USD pair. Indeed, ECB Council member Isabel Schnabel stated earlier this week that further interest rate hikes may no longer be necessary due to a significant decline in inflation. This could continue to undermine the common currency and limit the pair’s rises.
From a technical point of view, the previous day’s failure near the breakout point of the 200-day simple moving average (SMA) support, now converted into resistance, favors the bears. That said, it would be prudent to wait for a sustained break below the 100-day SMA, currently around the 1.0765-1.0760 zone, before positioning for an extension of the EUR/USD pair’s recent sharp pullback from the 1.1015 zone. , or the highest level since August touched last month. However, the pair remains on track to post losses for the second consecutive week.
Technical levels to monitor
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.
