Is EUR/USD Resuming Uptrend After Friday’s NFP?

Posted Monday, August 7, 2023 by
Skerdian Meta • 2 min read

EUR/USD has been on a bullish trend since October last year, with the USD on a broader retreat as markets have been expecting the FED to stop rate hikes. Although we saw a bearish reversal by the middle of July, after some decent economic figures from the US, which were given extra importance by the FED speech in the last meeting, as they left the future of rate hikes to the performance of the data.

So, this pair faced a significant downward trend for the last three weeks, which persisted throughout last week as well, driven by weak data from the EU, while the US data maintained a robust performance. We saw a slight increase in core inflation for July; while the Q2 GDP also came above expectations at 2.4%, catching the market off-guard after Q1 had remained stagnant.

Conversely, both German and EU manufacturing PMI reported unsatisfactory figures as new orders experienced a slowdown, despite prices declining rapidly. The unexpected positive outcome in Wednesday’s ADP jobs report from the US further bolstered the bearish momentum, sending EUR/USD to 1.09 lows.

Although moving averages held as support on the daily chart and the rice formed a doji candlestick on Thursday, which is a bullish reversing signal after the decline. On Friday, we saw a strong jump after soft Non-Farm Payrolls numbers, which sent the USD down across the board. EUR/USD surged more than 100 pips and closed above 1.10, so this looks like the beginning of the bullish trend resuming.

The US Non-Farm Payrolls (NFP) report displayed a second consecutive month of lackluster performance. Upon closer examination, the results were more mixed, but nonetheless, this led to a decrease in the likelihood of a rate hike in September by the FED, dropping from around 20% to 13% following the data release. This shift prompted a decline in the US dollar and bond yields, while gold experienced an upswing and stock markets achieved a degree of stability.

With the completion of the July jobs report, the market now awaits three more significant data releases before the Federal Open Market Committee (FOMC) convenes on September 20th. Within this timeframe, there remains one more jobs report scheduled for September, along with two additional Consumer Price Index (CPI) reports, the first scheduled for later this week. Should the CPI figures continue to weaken, it could solidify expectations of maintaining the current policy stance. On the other hand, the economic situation in Europe is even worse and the ECB has already ducked, so let’s see if this bullish reversal will materialize into higher highs for EUR/USD soon.