EUR/USD and $1.085 Hinged on US Jobs Report and Debt Ceiling Vote
It is a quiet day ahead for the EUR/USD. French industrial production and Spanish unemployment numbers will be out later this morning. However, barring an unexpected surge in unemployment, the French industrial production figures should garner more interest.
The French manufacturing sector continued to contract in May, with the manufacturing PMI rising from 45.6 to 45.7. Economists forecast industrial production to rise by 0.3% in April versus a 1.1% decline in March. Weak numbers would test buyer appetite.
With the economic calendar on the light side, market risk sentiment will also provide direction ahead of the US session. We expect investors to continue focusing on US debt ceiling-related news, with the Senate set to vote on the Bill.
While there are no ECB members on the calendar to speak today, investors should monitor chatter with the media in response to the prelim inflation numbers for May.
EUR/USD Price Action
This morning, the EUR/USD was up 0.04% to $1.07654. A mixed start to the day saw the EUR/USD fall to an early low of $1.07564 before rising to a high of $1.07669.
Resistance & Support Levels
|R1 – $||1.0799||S1 – $||1.0693|
|R2 – $||1.0837||S2 – $||1.0624|
|R3 – $||1.0944||S3 – $||1.0517|
The EUR/USD has to avoid the $1.0731 pivot to target the First Major Resistance Level (R1) at $1.0799. A move through the Thursday high of $1.07685 would signal a bullish session. However, the EUR/USD needs the debt ceiling news and economic indicators to support a breakout session.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0837. The Third Major Resistance Level (R3) sits at $1.0944.
A fall through the pivot would bring the First Major Support Level (S1) at $1.0693 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0650 and the Second Major Support Level (S2) at $1.0624. The Third Major Support Level (S3) sits at $1.0517.
Looking at the EMAs and the 4-hourly chart, the EMAs sent mixed signals. The EUR/USD sits below the 100-day EMA ($1.07900). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA pulled back from the 200-day EMA, delivering mixed signals.
A move through the 100-day EMA ($1.07900) and R1 ($1.0799) would give the bulls a run at the 200-day EMA ($1.08364) and R2 ($1.0837). However, a fall through the 50-day EMA ($1.07407) would bring S1 ($1.0693) into view. A fall through the 50-day EMA would send a bearish signal.
The US Session
Looking ahead to the US session, the US Job Report will be in the spotlight. While the markets are betting on the Fed to hit pause in June, a more marked pickup in wage growth and a solid increase in nonfarm payrolls could test the theory.
Bets on a 25-basis point Fed interest rate hike tumbled from 66.6% to 26.4% on Wednesday in response to Fed talk of favoring a June pause.
According to the CME FedWatch Tool, the chances of a 25-basis point interest rate hike fell from 26.4% to 20.4% on Thursday as investors responded to inflation and labor cost numbers.
However, FOMC members and US debt ceiling-related news will also need consideration. Investors await the outcome of a Senate vote on the Debt Limit Suspension Bill.