The labor market data didn’t give any significant support for the greenback as traders continue to focus on the Fed’s dovish shift. However, the euro could go lower in the medium term should the economic risks on the euro zone increase. It should be a warning signal that Italy has fallen back into recession in the last quarter as the economy shrunk by 0.2% after a decline by 0.1% earlier. By the way, it is now the third time the troubled economy has fallen into recession in a decade. In the final quarter of 2018, the euro area economy increased by only 0.2%.
As such, further deterioration in the economic data from Italy and Europe in general could put the single currency under pressure as dismal statistics will further push back ECB rate hike expectations and thus will reduce the appeal of the euro despite the dollar lags amid a more ‘patient’ Fed.
In the short term, EURUSD could challenge the 1.1425 support if further signs of economic weakness emerge in Europe. As for the 1.15 threshold, a break above is still unlikely at this stage.