EUR/USD Before NFP and post FED, direction 1.07?

The EUR/USD exchange rate is currently trading at around 1.0600 in the European morning on Thursday. This movement is largely influenced by several key factors. First, there is sustained weakness in the US dollar, following the recent decision by the Federal Reserve to extend its pause in monetary policy changes. Additionally, comments made by the Fed Chair, Jerome Powell, during the press conference, have contributed to this dollar weakness, as he emphasized the need for persistent long-term yield increases to influence monetary policy. Powell also noted that monetary policy is currently restrictive. As a result, the euro has gained strength, pushing the EUR/USD exchange rate above 1.0580 in the early Asian session on Thursday. Currently, EUR/USD is trading at about 1.0597, marking a 0.26% increase for the day. The recent Federal Open Market Committee (FOMC) meeting played a significant role in shaping market sentiment. The FOMC decided to keep the federal funds rate unchanged, as widely expected. However, it has opened the door to another rate hike, although there is a sense of caution regarding enthusiasm in pursuing it. This cautious approach has led to a decline in the US dollar, as many now believe that the rate hike cycle may have come to an end. Regarding economic data, private sector employment growth in the United States for October saw a modest increase but remained below market expectations, rising by 113,000 units, below the consensus of a 150,000-unit increase. However, JOLTS job openings unexpectedly improved, reaching 9.553 million openings, surpassing the expectation of 9.25 million. However, the ISM manufacturing PMI for October dropped to 46.7, the lowest value since July, reflecting a challenging economic environment. On the other side of the Atlantic, the European Central Bank (ECB) decided to keep interest rates unchanged last week, but the outlook suggests that interest rate cuts may be on the horizon in the second quarter of next year. This stance is driven by disinflationary pressures and concerns about weak GDP growth, with PMI data indicating an increased risk of a recession in the Eurozone. Recent economic indicators for the Eurozone have been mixed. The Eurozone's preliminary Harmonized Index of Consumer Prices (HICP) for October recorded an annual increase of 2.9%, down from the previous reading of 4.3% and below market expectations. The core HICP also decreased from 4.5% to 4.2%. The Eurozone's GDP for the third quarter (Q3) declined by 0.1% on a quarterly basis and grew only 0.1% on an annual basis, both below market expectations. In the H4 chart, my personal view is bullish, but currently, the price is in a supply zone, which could potentially bring the price back to the 1.0560 area, namely within a demand zone that has been supporting the EUR/USD since October 6th. So, I would personally look for a long entry at the M15 if and only if the price retraces to the demand zone and target 1.07. I remind you that the Non-Farm Payrolls (NFP) report is due tomorrow, so I advise caution as any scenario could change. Please leave a like and comment in support of our work. Greetings from Nicola, the CEO of Forex48 Trading Academy.

Comment:

The EUR/USD currency pair declined during the American trading session, reaching 1.0610 due to rising US bond yields supporting the US Dollar. However, the dollar remains under pressure due to increased risk appetite and ahead of the upcoming Non-Farm Payrolls (NFP) report. From a technical perspective, the Relative Strength Index (RSI) on the 4-hour chart moved above 50, and EUR/USD closed above the 100-period and 200-period Simple Moving Averages (SMA) in the last three 4-hour candles, indicating a short-term bullish outlook. Key resistance levels include 1.0640 (38.2% Fibonacci retracement), 1.0660 (static level), and 1.0700 (psychological level and 50% Fibonacci retracement). If EUR/USD falls below 1.0570-1.0580, technical sellers may become active, with 1.0530 serving as interim support before 1.0500. EUR/USD experienced a sharp turnaround during the American session on Wednesday, closing slightly higher after briefly touching 1.0500. The pair maintained its recovery momentum and reached 1.0600 during the early European session on Thursday. Late on Wednesday, the US Dollar faced selling pressure as the Federal Reserve (Fed) failed to convince the market about a potential December rate increase. The Fed left the policy rate unchanged at 5.25%-5.5% and emphasized a careful consideration of economic factors for further policy adjustments. Chairman Jerome Powell did not confirm a rate change this year but acknowledged that rising bond yields were tightening financial conditions. Commerzbank Research analysts believe it's increasingly likely that interest rates will remain unchanged, and the market prices in a 20% probability of a Fed rate hike in December. Following the Fed announcement, major US stock indexes gained, with US stock index futures up 0.3% to 0.7%, and the Euro Stoxx 50 Index up over 1%. If risk sentiment continues to dominate, EUR/USD may continue to rise until the release of the US October jobs report on Friday.