Title: EUR/USD Faces Key Resistance at 1.1637 Amid Market Focus on Fed and NFP Data
By TradingNews | Original article by James Bennet (via TradingNews.com)
The EUR/USD currency pair is navigating critical resistance near the 1.1637 level, as markets brace for a pivotal week driven by economic data and central bank developments. After recent attempts to gain momentum, the euro slipped back from its latest highs, weighed down by renewed strength in the US dollar and risk-off sentiment in global markets.
As the Federal Reserve’s monetary policy statements and the upcoming US Non-Farm Payrolls (NFP) report dominate economic headlines, traders are cautious in taking directional bias on the euro-dollar pair. The combination of inflation concerns, tapering expectations, and labor market conditions will act as key drivers for price movements in the days ahead.
This article provides an in-depth outlook on the EUR/USD pair, analyzing the technical setup, fundamental backdrop, and potential market scenarios over the near term.
EUR/USD Price Summary
– The pair recently attempted to hold above the 1.1600 handle but met resistance at 1.1637
– The US dollar has regained ground due to hawkish signals from Federal Reserve officials
– Traders are looking ahead to this week’s FOMC meeting and October’s NFP report for clues on the pace of monetary policy normalization
Market Catalysts Influencing EUR/USD
1. Federal Reserve Policy Outlook
The most significant near-term catalyst for the EUR/USD pair is the Federal Reserve’s policy stance. Traders anticipate a tapering announcement in the upcoming policy meeting, driven by inflation trends and the central bank’s dual mandate.
Key Fed considerations include:
– Recent inflation prints continue to exceed the Fed’s 2 percent target, raising concerns over “transitory” inflation assumptions
– Several FOMC members have signaled that the tapering of asset purchases could begin before year-end
– Interest rates are likely to remain unchanged for now, but markets will scrutinize the tone and language used during the post-meeting press conference
If the Fed highlights progress toward its goals and confirms a reduction in asset purchases, the US dollar will likely strengthen further, pressuring risk currencies including the euro.
2. Non-Farm Payrolls and Labor Market Reports
The October Non-Farm Payrolls report, scheduled for release shortly after the Fed meeting, will provide a vital read on the health of the US labor market. A robust report is expected to hasten rate hike expectations for 2022, while a weaker-than-expected outcome could soften the current hawkish outlook.
Market participants will focus particularly on:
– Total job additions to the US economy
– Unemployment rate direction
– Labor force participation rate
– Wage growth, a key indicator of future inflation
A strong job report would support the US dollar and drive EUR/USD lower, especially if bond yields rise in response to brighter economic prospects.
3. European Economic Outlook
While much attention is on the US side of the equation, developments in the eurozone also influence the EUR/USD dynamic. The European Central Bank remains dovish compared to its US counterpart, with President Christine Lagarde reiterating that inflationary pressures are expected to ease in 2022.
Eurozone growth data remains uneven, with the bloc still recovering from the economic shockwaves of the pandemic. Some concerns include:
– Slower-than-expected GDP growth in certain member states
– Ongoing energy supply concerns and rising input costs
– Lingering uncertainty over possible renewed COVID-19 restrictions during the winter months
From a policy stance, the ECB is unlikely to match the Fed’s hawkish pace anytime soon, thereby widening the transatlantic policy divergence and potentially exerting downward pressure on the euro.
Technical Outlook for EUR/USD
From a technical perspective, the EUR/USD pair remains in a broader downtrend after forming a series of lower highs and lower lows during the past few months. The failure to maintain upward momentum
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