- EUR/USD holds lower grounds after four-week downtrend, keeps post-NFP bearish bias.
- Downbeat Eurozone inflation clues contrasts with firmer US employment signals to keep Euro bears hopeful.
- Hawkish ECB comments, risk-on mood struggle to underpin bullish bias.
- US data eyed amid pre-Fed blackout period, corrective bounce in Euro price can’t be ruled out.
EUR/USD stays on the back foot around 1.0700, after a four-week downward trajectory, as markets brace for the key US data while keeping the post-NFP moves intact during early Monday in Asia. In doing so, the Euro pair bears the burden of downbeat Eurozone numbers suggesting that the inflation pressure on the old continent eases contrast to the upbeat US numbers. With this, the quote fails to cheer the broad market optimism, as well as downbeat US Treasury bond yields.
During the last week, the headline inflation numbers from the Eurozone and Germany eased for the second consecutive month and renewed speculations that the European Central Bank (ECB) is near to pausing the rate hike even if the policymakers stay hawkish. Also exerting downside pressure on the bloc’s currency are the political jitters in Greece and Spain, as well as the Eurozone versus Russian tension that is likely to have economic consequences for the former and renew recession calls for the bloc.
That said, on Friday, European Central Bank (ECB) policymaker, Boštjan Vasle, “More rate hikes needed to get inflation to the 2% target.” The policymaker also added that the core inflation remains high and persistent. On the same line, ECB Governing Council member, Gabriel Makhlouf, said on Friday that they are “likely to see another rate increase at the next meeting.”
On the other hand, the US jobs report for May surprised markets with a jump in the headline Nonfarm Payrolls (NFP) by 339K versus 190K expected and 294K prior (revised). It’s worth noting, however, that the Unemployment Rate also rose to 3.7% from 3.4% prior, versus 3.5% market forecasts. It should be noted, that the Average Hourly Earnings eased whereas the Labor Force Participation Rate remain the same as previous.
It’s worth noting, however, that the market’s risk-on mood put a floor under the EUR/USD price as US President Joe Biden signed the debt-ceiling bill and avoided the ‘catastrophic’ default. Also positive were concerns suggesting slower rate hikes from the major central banks. Furthermore, the global rating agencies remain cautious about the US financial market credibility and prod the US Dollar despite the price-positive move on Friday. “Fitch Ratings said on Friday the United States’ “AAA” credit rating would remain on negative watch, despite the agreement that will allow the government to meet its obligations,” said Reuters.
Against this backdrop, the United States Treasury bond yields and the US Dollar marked the first weekly loss in four while Wall Street closed on the positive side.
Looking ahead, US Factory Orders for April and ISM Services PMI for May will be important to watch for the intraday directions as the latest US jobs report renew hawkish bias for the Federal Reserve (Fed) and allow the US Dollar to remain on the buyer’s radar. It should be observed that the Fed policymakers are stipulated for any public comments ahead of next week’s Federal Open Market Committee (FOMC), which in turn may allow the EUR/USD to pare some of the latest losses in a case where the US data flash downbeat prints.
Technical analysis
EUR/USD remains sidelined between the 100-day Exponential Moving Average (EMA) and the 200-day EMA, currently between 1.0770 and 1.0685 in that order. That said, the below 50 levels of the RSI (14) line and an impending bull cross on the MACD keeps the pair buyers hopeful.
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