EUR/USD bulls move as market corrects, focus on US jobs data
- EUR/USD bulls are hesitant in the open but could be encouraged by a discount.
- The coming week will once again be a busy one on the American calendar.
EUR/USD ended the day up around 0.28% after rising from 1.0145 to 1.0254, the high of the day, as US equities headed for the best month since late 2020 in a risky environment. In turn, the US dollar was sliding, bleeding from a dovish tilt at the Federal Reserve and perceiving an easing of sentiment from policymakers.
US gross domestic product fell 0.9% last quarter, which also weighed on US yields and the greenback, adding to a 1.6% contraction in the prior quarter. Last week, the US Federal Reserve raised its key rate by 75 basis points for the second consecutive meeting and Chairman Powell noted that the Fed may slow the pace of its hike in future meetings.
Meanwhile, Eurozone GDP growth beat expectations, rising 0.7% in the second quarter (exp: 0.2%, prev: 0.5%), despite slowing German growth, France and Spain exceeded expectations. However, given the energy supply pressures facing the continent, traders might prefer to focus on these implications.
NFP in focus
Elsewhere, markets shrugged off data suggesting slightly stronger than expected inflationary pressures in the US and perhaps the focus will now shift to this week’s critical nonfarm payrolls data. U.S. employment likely continued to grow steadily in July, TD Securities analysts said, but at a more subdued pace after four straight job gains to just under 400,000 in March-June. ”High-frequency data, including Homebase, still indicates above-trend job creation. We also expect the EU rate to remain at 3.6% for a fifth consecutive month and wage growth to remain stable at 0.3% m/m (4.9% yoy).”
Meanwhile, with this week’s PMIs, previously released US surveys point to a further deceleration in manufacturing and services activity in July, as hard data and sentiment measures have continued to deteriorate in recent months (in especially the July services PMI flash estimate). “Although we are looking for a decline in both ISM polls, we expect them to remain above the 50 mark, which would still signal expansion,” analysts at TD Securities said.
EUR/USD technical analysis
The hourly W formation pulls the price towards the neckline for the open, so we could see bulls settling in at a discount for the upcoming sessions at the start of the week.