EURUSD On Watch Into Today's NFP Release
ECB/Fed Divergence
EURUSD is on watch today as traders brace for the latest US NFP report. The recent shift lower in Fed tightening expectations is creating bullish divergence between the ECB and the Fed, suggesting room for a fresh push higher in EURUSD if today’s jobs data undershoots forecasts. The ECB is widely expected to raise rates again this month in line with the recent resurgence in inflation and hawkish comments from policymakers. However, there is more uncertainty ahead of the September FOMC and USD has drifted lower this week in response to dovish comments from two leading Fed policymakers.
Trading Scenarios Today
As such, there is a huge amount of focus on today’s jobs data which is seen as pivot for determining whether the Fed will hike this month. If today’s data comes in on the weak side, this should put an end to September tightening expectations, leading USD lower and EUR to surge higher. The stage is then set for a further appreciation in EURUSD if the ECB hikes as expected and keeps the door open for further tightening. On other hand, if today’s data surprises to the upside (possible given the low estimate), this should see September tightening expectations spiking again, leading USD higher and EURUSD lower again.
Technical Views
EURUSD
The rally in EURUSD has seen price breaking back above the 1.16 level which is subsequently holding as support for now given the recent correction lower. While this price holds as a floor, focus is on a fresh push higher with 1.1756 the next bull target. To the downside, 1.1490 is the next support to watch if we break lower.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.