Key talking points:

  • EUR / USD drops to lowest level since April as USD shows resilience
  • NFP data to determine short-term EUR / USD performance

EUR / USD has not been able to regain a foothold since the massive selloff two weeks ago. The US Dollar has shown resilience in what would typically be month-end rebalancing weakness for the currency as traders await the much-anticipated NFP data tomorrow. Yesterday’s ADP data showed an increase of 629,000 jobs in June, which was more than the 600,000 expected. But if anything we’ve learned over the past few months, it’s that ADP is a poor predictor of NFP data, but hopes are high for a strong surpass of the expected number of 700,000 tomorrow.

The past two months have shown mediocre readings of the non-farm payroll and this has lowered market sentiment. It’s not that the data doesn’t show a good economic recovery, it’s the fact that the Fed suggested a few months of solid jobs data before it could start thinking about a change in monetary policy. which is a good thing for stocks but was lagging behind the US dollar.

On the euro front, there are still concerns about the spread of the Delta variant across the continent, threatening the summer holiday season and straining the euro. As far as the ECB is concerned, the likelihood of a policy change, or even a mention, before the end of the year is very slim, with money markets not expecting a rate hike until 2023. This difference central bank positioning is likely to be a key driver for EUR / USD going forward.

Source: Réfinitiv

EUR / USD levels

EUR / USD is hovering near its lowest level since April, with the Stochastic Oscillator just below 30, showing the bears are in control. Immediate support can be found at the psychological level of 1.18 followed by 1.1738 and 1.1704 which would mark the lowest point for the pair in 2021.

A lower than expected NFP reading would likely push the dollar down and allow EUR / USD to regain some upside momentum. The key level to watch is 1.1975, where two previous rebound attempts have been halted. Further than that is where the moving averages are, so we can see increased resistance.

EUR / USD Daily graphic

Euro Outlook: EUR / USD Bears Are Under Control As Euro Looks Vulnerable

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

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