Euro bulls struggle near 1.0900 as US NFP, ECB President Lagarde’s speech loom

• EUR/USD fades bounce off three-week low ahead of top-tier catalysts.
• Euro buyers cheer more hawkish ECB bias than Fed amid mixed EU, US data.
• US employment clues amplify trader’s anxiety ahead of NFP even as Fed’s 0.25% rate hike in July is almost given.
• ECB President Lagarde needs to push back concerns of policy pivot and German recession to convince Euro bulls.

EUR/USD aptly portrays the pre-NFP anxiety as it stays defensive near 1.0890 amid the early hours of Friday, after posting a stellar recovery from a three-week low the previous day. Apart from the US employment report, a speech from European Central Bank (ECB) President Christine Lagarde also increases the importance of today’s trading for market players.

It should be noted that the comparatively more hawkish bias of the ECB policymakers, versus those from the Fed, allowed the Euro pair to recover the previous day even as data from the Eurozone and the US both appeared mixed.

On Thursday, Eurozone Retail Sales reprints 0.0% MoM and -2.9% YoY figures for May, versus 0.2% and -2.7% expected respectively. However, Germany’s Factory Orders jump 6.4% MoM in May versus 1.5% expected and -0.4% prior whereas the yearly figures improve to -4.3% from -9.9% previous readouts.

On the other hand, US ADP Employment Change marked the largest one-month increase since February 2022, to 497K for June versus 228K expected and 267K prior (revised). That said, the ISM Services PMI also improved to 53.9 for the said month from 50.3 in May, versus the market expectation of 51.0. Further, the Challenges Job Cuts also slumps to 40.709K from 80.089K previous readings. However, the JOLTS Job Openings drops to 9.8M from 10.103M, compared to analysts’ estimation of 9.93M. It should be noted that the Initial Jobless Claims also rises to 248K for the week ended on June 30, versus 245K expected and 236K previous readings (revised).

It’s worth noting that the interest rate futures suggest a nearly 85% chance for a 0.25% increase in the interest rates from the ECB and the Fed both during July monetary policy meeting. However, the odds of witnessing a policy pivot have been on the spike after the US central bank paused the rate lift trajectory in July.

Alternatively, the looming recession in Germany prods the ECB hawks even if most of them keep backing further rate hikes, at least in 2023.

Elsewhere, geopolitical fears emanating from China, as well as the dragon nation’s economic concerns, join the strong Treasury bond yields in the US and Europe to prod the EUR/USD bulls. That said, the downbeat performance of Wall Street benchmarks also portrays the risk-off mood in the market. However, the US Dollar Index (DXY) fails to cheer the haven status as market players brace for the headline Nonfarm Payrolls (NFP), expected to ease to 225K from 339K. Should the jobs report arrive as positive and ECB’s Lagarde fail to defend the hawkish bias, the EUR/USD can witness a fresh downside.

Also read: Forex Today: A mixed Dollar awaits NFP after strong US data

Technical analysis

A clear upside break of a fortnight-old resistance line, around 1.0890 by the press time, becomes necessary to avoid the risk of witnessing EUR/USD pullback to the 100-DMA support of around 1.0830.