EUR/USD gave up its intraday gains and slid below 1.1100 after hitting a fresh weekly high of 1.1150 during Friday’s North American session. The earlier gains in the currency pair faded due to a strong rebound in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback against six major currencies, surged to nearly 101.40 after reversing its earlier losses.
Despite this, the near-term appeal of the US Dollar remains uncertain, as the United States’ (US) Nonfarm Payrolls (NFP) data for August came in below expectations. Employers added 142K jobs, short of the forecasted 160K, but higher than July’s revised figure of 89K (down from the initial 114K). The Unemployment Rate decreased to 4.2%, in line with expectations, down from 4.3% in the previous release.
The US Dollar had already been under pressure earlier in the week, with data from US JOLTS Job Openings and ADP Employment reports for August raising concerns about the weakening labor market. Job openings were at 7.67 million, and payroll additions in the private sector were 99K, both marking the lowest levels in over three years.
Although the US ISM Services PMI for August beat expectations, it was not enough to support the US Dollar.
Concerns about a slowing labor market have fueled expectations that the Federal Reserve (Fed) might begin cutting interest rates soon. According to the CME FedWatch tool, the likelihood of the Fed reducing rates by 50 basis points (bps) to a range of 4.75%-5.00% has risen to 43%, up from 34% a week ago.
In the meantime, US Average Hourly Earnings—a key indicator of wage growth that influences consumer spending—rose faster than expected in August. Year-over-year, wages increased by 3.8%, exceeding the forecast of 3.7% and July’s figure of 3.6%. On a monthly basis, wage growth accelerated to 0.4%, surpassing expectations of 0.3% and the prior release of 0.2%.
EUR/USD failed to maintain its position above the 1.1100 level, but the pair’s near-term outlook remains positive as it holds support near the 20-day Exponential Moving Average (EMA) around 1.1055.
The long-term outlook for EUR/USD is also bullish, with the 50-day and 200-day EMAs trending upward at 1.0970 and 1.0865, respectively. The pair also maintains a Rising Channel breakout on the daily chart.
The 14-day Relative Strength Index (RSI) has fallen below 60.00 after reaching overbought territory near 75.00.
On the upside, the recent high of 1.1200 and the July 2023 peak at 1.1275 are the next targets for Euro bulls. On the downside, support is expected to hold near the psychological level of 1.1000.
