The EUR/USD exchange rate has slowly made a strong comeback after moving below parity in 2022. It was trading at 1.0917 on Friday, which was ~14.35% above the lowest point in 2022.
US NFP data preview
The biggest forex news on Friday will be the upcoming US non-farm payrolls (NFP) data, which I wrote about here. These numbers will be watched closely because of the current uncertainty about what the Fed will do.
The Federal Reserve decided to hike interest rates by 0.25% in March for the second straight month. It also said that it will continue being data-dependent in the coming months.
When the Fed talks about being data-dependent, the two important ones are jobs and inflation since they are part of the dual mandate.
Therefore, Friday’s NFP data will be important because they will create a theme of what to expect when the Fed meets in May this year.
Economists believe that the labor market was relatively muted in March as more countries continued worrying about the economy. Many large companies have announced large-scale mass layoffs in the past few months.
Therefore, economists believe that the economy added 215k jobs in March after adding 311k jobs in the previous month. They also expect the unemployment rate remained unchanged at 3.6% during the month.
Data published this week signal that the labor market likely weakened in March. On Monday and Wednesday, data by ISM showed that the manufacturing and services PMIs declined in March.
Another report by ADP showed that the private sector added less than 150k jobs in March, lower than the 268k it added in February. Therefore, strong NFP data will push the Federal Reserve to maintain its hawkish tone. Earlier this week, Cleveland Fed’s Loretta Mester said that she supported several more hikes.
EUR/USD technical analysis
EUR/USD chart by TradingView
The daily chart shows that the EUR to USD exchange rate continued its bullish trend this week. This happened as hopes of Europe’s economic resurgence continued. The pair has moved above all moving averages and the key support level at 1.0783.
Most importantly, the pair is approaching the make-or-break level of 1.1032. This is an important level since it is a sign of a double-top pattern whose neckline is at 1.0515. Therefore, for the pair to continue rising, it needs to move above this level. Failure to do that will see the pair continue plunging to the neckline at 1.0515.
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