EURUSD climbs to daily highs beyond the 0.9800 yardstick on NFP

  • EURUSD keeps the bid tone above the 0.9800 mark on Friday.
  • US Nonfarm Payrolls surprised to the upside in October.
  • The Unemployment Rate climbed to 3.7% (from 3.5%).

EURUSD extends the daily upside to the 0.9810/15 band, or daily highs, in the wake of another solid report from US Nonfarm Payrolls on Friday.

EURUSD looks supported near 0.9750

EURUSD briefly revisited the mid-0.9700s soon after Nonfarm Payrolls showed the US economy added 261K jobs during October, surpassing initial estimates for a gain of 200K jobs. The September reading was revised up to 315K (from 263K).

Further data saw the Unemployment Rate ticked higher to 3.7% (from 3.5%) and the key Average Hourly Earnings – a proxy for inflation via wages – rise 0.4% MoM and 4.7% from a year earlier. Additionally, the Participation Rate, receded a tad to 62.2% (from 62.3).

Despite the strong Payrolls keep supporting the case for the continuation of the tightening cycle by the Federal Reserve, the greenback remains on the defensive, while US yields extend their march north.

What to look for around EUR

EURUSD manages to regain some poise – and the 0.9800 mark – despite the stronger-than-expected Payrolls for the month of October.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).

Furthermore, the increasing speculation of a potential recession in the region – which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: EMU/Germany Final Services PMI, ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is gaining 0.50% at 0.9794 and faces the next resistance at 0.9975 (weekly high November 2) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12). On the other hand,  a breach of 0.9704 (weekly low October 21) would target 0.9631 (monthly low October 13) en route to 0.9535 (2022 low September 28).

 

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