NFP Release: Potential Game Changer After a Dollar-Dominated Week
EUR/USD at Crossroad. Economic Data Will Decide What’s Next.
Last week, the US Dollar did pretty well against most of its major rivals, even though the Federal Reserve hiked the interest rate and didn’t provide much assurance about future tightening. At this time, it looks like the future course is largely dependent on economic data. On the other hand, the European Central Bank also increased rates, keeping the possibility for future tightening on the table. However, traders weren’t too pleased with the Euro, given that President Christine Lagarde didn’t sound very devoted to a rate hike in September.
The Euro’s performance at the end of the week was a bit of a roller coaster, influenced mostly by the performance of other currencies. The coming week’s sticky Eurozone Core CPI data could provide some support to the Euro, but worries over economic growth could be a drag.
The strength of the US Dollar weakened a bit on Friday after the PCE data came in below the forecast.
Key Data for the Week Ahead
The first release of the week comes early Monday, at 9:00 am GMT: the Eurozone CPI and Core CPI. This could be a game-changer as the ECB mentioned a data-dependent approach and the CPI is the main gauge of inflation.
Tuesday at 2:00 pm GMT we take a look at the U.S. Manufacturing PMI, which is a survey of about 300 purchasing managers from the manufacturing sector. It acts as a leading indicator of health for the economy and has a medium impact on the US Dollar.
Thursday at 2:00 pm GMT the U.S. Services PMI will be released. This is slightly more important than the Manufacturing PMI because the U.S. economy is more geared toward the services sector.
The main event of the week is the U.S. jobs data that will be released Friday at 12:30 pm GMT. We have the always important Non-Farm Payrolls, as well as the Average Hourly Earnings and the Unemployment Rate. Job creation is expected to decrease from the previous 209K to 200K.
Technical Outlook – EUR/USD
After the failed break of 1.1175, the bears took control and drove the price into the support at 1.1000. This zone is very important for several reasons. It is a big round number (BRN), thus it acts as S/R more often than not. Also, we can see that it rejected the price several times in the past.
Moreover, the pair has reached a bullish trend line drawn from the May low (1.0635) and the 50-day Moving Average is in close vicinity.
All these factors create a confluence zone of support, which will be hard to break. However, if we see a clear break of the said support zone, it means that the bears have momentum and that the pair may be traveling to the next important level, possibly to the lower Bollinger Band.
Keep in mind that the pair’s general direction will be heavily influenced by the data released throughout the week, especially the NFP that comes out Friday.
