EUR/USD plunged below the critical 1.1000 level on Friday following a stronger-than-expected US Nonfarm Payrolls (NFP) report for September. The US economy added 254,000 jobs last month, far exceeding forecasts of 140,000.
This robust labour market data boosted the US Dollar Index (DXY) above 102.50, as investors reduced expectations for another large Federal Reserve (Fed) interest rate cut in November.
The unemployment rate also dropped to 4.1%, below the previous reading of 4.2%, suggesting sustained labour market strength.
This positive data tempered market expectations for a 50 basis points (bps) rate cut by the Fed next month, now down to a 10% probability, compared to 33% before the report, as per the CME FedWatch Tool.
The report also showed that wage growth remains strong, with Average Hourly Earnings rising 4% year-over-year. This raised concerns over persistent inflation, which could keep the Fed on a cautious path.
Technical Analysis: EUR/USD breaches 1.1000 support
EUR/USD has broken below the key psychological support at 1.1000, weakening the near-term outlook.
The pair is currently trading around $1.0975, below the 50-day EMA at $1.1040, indicating bearish momentum. Immediate support lies at $1.0930, with further downside likely to test the 200-day EMA at $1.0900.
On the upside, the 20-day EMA at $1.1090 serves as the first resistance, followed by $1.1200, the September high. If EUR/USD manages to reclaim 1.1000, it may gain traction, but the bias remains negative.
Key technical insights:
- Immediate Support: $1.0930
- Immediate Resistance: $1.1090
- RSI: Bearish, below 40
EUR/USD’s momentum hinges on whether the pair can hold above the next support at $1.0930 or face additional pressure, pushing it towards $1.0900. The pair remains bearish unless it reclaims $1.1000 and surpasses the $1.1090 resistance level.
