EUR/USD experienced a sharp decline on Friday following the release of higher-than-expected US Nonfarm Payrolls data and comments from ECB President Lagarde suggesting that a follow-up rate cut may not be likely in the near future. The Nonfarm Payrolls data showed an addition of 272K new jobs in May, well above the forecast of 185k, leading to a stronger labor market and higher wages.
This news threw a wrench into hopes for a rate cut by the Federal Reserve, with the odds of a rate cut in September dropping from 70% to 51% after the NFP print. Despite the rate cut by the ECB earlier in the week, Lagarde emphasized that progress on inflation has been inconsistent and a firm commitment to further rate cuts will require more evidence of disinflation. This cautious approach from the ECB dampened hopes for a rebound in the Euro.
The Nonfarm Payrolls release is a key economic indicator that presents the number of new jobs created in the US in non-agricultural sectors. The data can be highly volatile and subject to revisions, leading to potential market reactions. A high reading is usually seen as bullish for the US Dollar, while a low reading is considered bearish. The market’s response depends on the overall assessment of the BLS report, taking into account other factors such as the Unemployment Rate.
From a technical perspective, the EUR/USD pair has fallen back into familiar congestion levels following Friday’s decline. The pair is currently trading around the 1.0800 handle, with potential support seen at the 200-day Exponential Moving Average (EMA). Bidders are looking for a rebound from key technical levels, but a further decline could push the pair towards 1.0750 before finding buyers. Traders will be monitoring the trendline setup for potential buying opportunities in the coming sessions.
Overall, the recent economic data and comments from central bank officials have shifted market expectations and impacted the EUR/USD pair. While the US economy shows signs of strength, the Eurozone remains cautious about further rate cuts. Traders will continue to watch for upcoming data releases and statements from policymakers to gauge future movements in the currency pair.
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