NFP Disaster Sparks Fear of Recession. USD on the Ropes
EUR/USD Hits Long-Term Trend Line. Bounce-or-Break Scenario in Play
The US Dollar received a big hit from the NFP and accompanying reports, which sent the US Dollar Index (DXY) to a low at 102.65 and EUR/USD to a high at 1.0940. The jobs data also sparked fears of a recession and talks about a 50-bps rate cut in September.
The Non-Farm Employment report, which we were used to print readings above expectations, pulled a 180 and this time it came way below consensus. The actual number was 114K, lower than the expected 176K. The Unemployment Rate increased to 4.3% from the previous/expected 4.1% and the Average Hourly Earnings showed a 0.2% change (previous/expected was 0.3%).
At the time of writing, there’s a 95.5% chance that the Fed will cut rates to 475 – 500 at their September meeting, according to CME’s FedWatch tool. Currently, the rate sits at 525 – 550, so that would be a 50-bps cut.
Economic Calendar Highlights
We have a very slow week ahead, so the technical aspect will prevail but the charts will be also affected by any news or speculation regarding the next rate move.
The ISM Services PMI will be released Monday at 2:00 pm GMT, showing the opinions of about 300 purchasing managers on the current business conditions in the Services sector. The survey has an immediate impact if the actual number differs significantly from the forecast; otherwise, its effects will spill into the markets at a slower pace.
The U.S. Unemployment Claims will come out Thursday at 12:30 pm GMT and the German Final CPI will be released Friday at 6:00 am GMT. These are not usually highlights or market-movers but the economic calendar is very light this week, so the impact of these releases may be more notable than usual.
Technical Outlook – EUR/USD
After a perfect bounce at 1.0775 support, the pair shot up and broke the resistance at 1.0900. Or at least that’s how things looked because now we can see some rejection at the bearish trend line, which could send the price below 1.0900, resulting in a false break.
This trend line, which was drawn starting from the July 2023 high, will be very important for medium-term movement no matter whether it will be broken or if it will reject the price. It’s a long-term technical boundary, which will influence the decisions of traders by creating a snowball effect. A bounce or a break will bring in additional sellers or buyers and will probably send the pair into 1.0775 or 1.1000, respectively.
