Key Takeaways:
- Labor Market Impact: A weaker NFP report could spur expectations of a 50 bps rate cut in November, supporting EUR/USD.
- Technical Levels to Watch: Support at $1.1005; resistance at $1.1052. Breakouts may signal new directional moves.
- Fed Outlook: Mixed US economic data keeps the rate-cut scenario in play; NFP results will be the key determinant.
Nonfarm Payrolls Expected to Show Modest Growth for September
The US Bureau of Labor Statistics (BLS) is planning to release the highly anticipated nonfarm payrolls (NFP) report for September on Friday.
Market participants are closely monitoring this report, as it will play a crucial role in shaping the Federal Reserve’s monetary policy outlook.
After the US economy added 142,000 jobs in August, economists predict a slightly softer job growth of 140,000 for September.
The unemployment rate is expected to hold steady at 4.2%, while average hourly earnings are forecasted to increase by 0.3%, maintaining the year-over-year growth rate at 3.8%.
Fed Chairman Jerome Powell recently downplayed expectations for a 50 basis points (bps) rate cut, emphasizing the Fed’s cautious stance on further monetary easing.
However, if the NFP data shows a considerable cooling in the labor market, it could bolster market expectations for a significant rate cut in November, which could weigh on the US Dollar (USD) and push the EUR/USD pair higher.
How the NFP Report Could Impact EUR/USD
According to the CME Group’s FedWatch Tool, markets are currently pricing in a 37% chance of a 50 bps rate cut in November, down from 53% earlier this week.
A weaker-than-expected NFP report could revive the probability of a larger rate cut, potentially pushing EUR/USD higher towards 1.1200.
Conversely, if the NFP headline figure rises to the upside and wage inflation remains strong, the Fed might consider a smaller 25 bps rate cut, which would likely strengthen the USD and drag EUR/USD down towards 1.0900.
This week’s mixed economic data has already kept the markets on edge. While the Institute for Supply Management (ISM) Manufacturing PMI showed a contraction in the US manufacturing sector, the JOLTS Job Openings data revealed an increase to 8.04 million in August, a three-month high.
Technical Analysis: EUR/USD Eyes Key Levels Ahead of NFP Release
EUR/USD is currently trading at $1.1031, up 0.05% for the session, and hovering near its pivot point of $1.1026. The pair’s immediate support is at $1.1005, and the next support is at $1.0980.
On the upside, the first resistance level is at $1.1052, with additional resistance seen at $1.1078 and $1.1100.
Technical indicators suggest a neutral outlook for the pair. The 50-day EMA at $1.1090 and the 200-day EMA at $1.1102 are acting as dynamic resistance levels. If the pair breaks below $1.1005, it could trigger a bearish momentum, targeting $1.0957 and $1.0933.
