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EUR/USD: market waiting on payrolls

Previous:

Trading on the euro ended in the red on Thursday. On the back of the growing EUR/GBP cross, the eurobulls held up above the 1.0800 mark for 8 hours. The cross shot up after the Bank of England's interest rate decision and inflation report, in which projected inflation was reduced.

After a slide to 2.4330%, US 10-year bond yields corrected to 2.4857%. This growth helped prop up the dollar at the expense of the single currency. By the end of the session, the EUR/USD rate had fallen to 1.0756.

Market expectations:

Today, traders' focus will be on the US labour market report (nonfarm payrolls). If the ADP index is anything to go by - which in January showed a growth of 246,000 new jobs in the private sector (up from 151,000 the previous month and beating the forecast of 165,000) - then on Friday we could well see an NFP value upwards of 175,000 new jobs (last month's figure was 151,000). If it turns out higher than 200,000, then the euro will return to around 1.0685. The NFP tends to affect the market for about an hour after publication.

On payrolls day, I don"t usually make forecasts, but I've decided that I will today. Based on historical patterns and cycles, I'm forecasting a fall in the euro to 1.0699. Again, this forecast is not taking the NFP release into account, which is expected at 16:30 EET.

Day's news (GMT 3):

  • 11:55 Germany: Markit Service PMI (Jan);
  • 12:00 Eurozone: Markit Services PMI (Jan);
  • 12:30 UK: Markit Services PMI (Jan);
  • 13:00 Eurozone: retail sales (Dec);
  • 16:30 USA: average hourly earnings (Jan), nonfarm payrolls (Jan), unemployment rate (Jan);
  • 17:15 USA: Fed's Evans speech;
  • 17:45 USA: Markit Services PMI (Jan);
  • 18:00 USA: ISM non-manufacturing PMI (Jan), factory orders (Dec);

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.0699, high: 1.0780, close: 1.0724.

Just as the EUR/GBP cross stopped growing and started a correctional phase, the EUR/USD rate fell to 1.0756 on the back of a rise in US bond yields. At the time of writing the euro is worth 1.0757 USD.

From a high of 1.0829, the euro fell against the dollar by 67 degrees. The rate in Asia hit a new low. The price bounced off the lower A-A channel. Before the NFP I'm predicting the rate will return to 1.0778. From there I expect the euro to fall to the 112th degree (to 1.0699). This forecast is not at all based on the payrolls themselves, however, but rather on the historical pattern that I've found, which fits in well with the hourly cycles. If the NFP has a strong showing, the euro could fall to around 1.0685.

If the NFP figures turn out lower than 175,000, and the unemployment rate increases, then the euro will strengthen all the way to the upper boundary of the A-A channel (1.0840).

 



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