The pair will likely remain in the current range and then have a bearish breakout after the US jobs data.
Bearish View
- Set a sell-stop at 1.0130 and a take-profit at 1.0045.
- Add a stop-loss at 1.0235.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0225 and a take-profit at 1.0300.
- Add a stop-loss at 1.0125.
The EUR/USD currency pair came under intense pressure after the strong American jobs numbers pointed to more tightening by the Federal Reserve. The pair dropped to a low of 1.0160, which was slightly below last week’s high of 1.0300.
More Fed Tightening Likely
The EUR/USD pair made a strong bearish breakout as investors reflected on the latest US non-farm payroll data. According to the Bureau of Labor Statistics (BLS), the economy added over 528k jobs in July, a strong surprise since analysts were expecting it to add just 225k jobs. It was also better than the adjusted 392k jobs that were created in June.
Additional data revealed that the unemployment rate dropped from 3.6% to 3.5% in July. This decline was equally better than what analysts were expecting. Further, the labor participation rate and wages continued rising. These numbers imply that the American economy took two years to recover the 22 million jobs it lost during the pandemic.
Therefore, these numbers imply that the Federal Reserve will likely continue with its rate hike campaign to defeat the soaring inflation. Data published in July showed that America’s inflation rose to a multi-decade high of 9.1% in June.
The next major catalyst for the pair will be the upcoming US inflation numbers scheduled for Wednesday. Economists expect the data to show that the country’s inflation fell from 9.1% to 8.7% on a year-on-year basis. They also believe that it dropped from 1.3% to 0.2% on a month-on-month basis as the price of gasoline dropped. Still, inflation remains significantly above the bank’s target of 2.0%.
There is no major scheduled economic data from Europe this week. Therefore, focus will remain on the US dollar as global risks rise. The war in Ukraine is going on while China has ramped pressure on Taiwan.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair has remained between the important support and resistance levels at 1.0100 and 1.0296 in the past few weeks. It dropped slightly after the latest US jobs data and moved slightly below the 25-day moving average.
At the same time, the pair remained above the 23.6% Fibonacci Retracement level. Notably, it has formed a small head and shoulders pattern. Therefore, the pair will likely remain in the current range and then have a bearish breakout after the US jobs data.
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