EUR/USD Daily Price Forecast – EUR/USD Stable above 1.161 Handle Ahead of US NFP Update

The EUR/USD rose to a high of 1.1659 yesterday on the back of a drop in the 10-year Italy-German yield differential. However, the bullish mood turned sour on reports that the Trump administration is now steering towards imposing additional tariffs on $200 billion worth of Chinese imports, having put a 25 percent levy on $50 billion worth of Chinese goods in July. As a result, the currency pair surrendered gains and closed at 1.1622. The common currency could pick up a bid today if the Italy-German yield spread continues to slide, implying that the market pessimism over the Italian budget is receding. As of writing this article, the pair is trading at 1.1629 up 0.06% on the day and recent price action in 1 hour and 4 hour chart indicates that pair has consolidated above 1.161 Handle.

Sino-U.S. Trade War Updates Remain Main Focus of Investors

However, a break above the previous day’s high of 1.1659 may remain elusive, courtesy of escalating US-China trade tensions. Moreover, China is likely to retaliate in kind if the US goes ahead with the fresh round of tariffs. That said, a big rally towards 1.1733 (recent high) could be in the offing if the US average weekly earnings and non-farm payrolls figure for August, scheduled for release at 12:30 GMT, misses estimates by a wide margin, adding credence to the argument put forward by the likes of Fed’s Bullard that the central bank should stop raising rates now.

On the other hand, a big beat on the wage growth figure would reinforce hawkish Fed expectations, driving the US dollar higher across the board. While the Eurozone second-quarter GDP, due for release at 09:00 GMT could move the EUR pairs. When looking from technical perspective, corrective rebound from support near the 1.13 figure has given way to consolidation below resistance capping gains since early June. Moving forward, a close above 1.1704 opens the door for a test of the 1.1840-52 area. Alternatively, a push back below support in the 1.1530-54 zone paves the way for a decline back to Augusts swing bottom and unless either of these price levels are breached the pair is expected move in range bound pattern trapped inside mentioned price levels.