EUR/USD Forecast: A Return to $1.0850 Hinged on the US Jobs Report

Highlights

• The EUR/USD gained 0.27% on Thursday, ending the session at $1.07935.
• German inflation numbers will draw investor interest on Friday.
• The US Jobs Report could impact investor bets on a Q1 2024 Fed rate cut.

Thursday Overview

The EUR/USD gained 0.27%. After a 0.30% loss on Wednesday, the EUR/USD ended the day at $1.07935. The EUR/USD fell to a low of $1.07550 before rising to a high of $1.08177.

German Inflation in the Spotlight

On Friday, finalized German inflation figures for November need investor consideration. A downward revision to the preliminary number could impact the buyer demand for the EUR. Softer inflationary pressures would allow the ECB to take a less hawkish rate path.

According to preliminary numbers, the annual inflation rate softened from 3.8% to 3.2% in November.

Beyond the numbers, ECB commentary needs monitoring. ECB Executive Board member Luis De Guindos is on the calendar to speak. Support for early discussions about rate cuts could weigh on the EUR/USD. Significantly, recent euro area economic indicators suggested a weakening macroeconomic environment at the start of Q4. Further deterioration could result in a prolonged economic recession.

US Jobs Report and Consumer Sentiment in the Spotlight

On Friday, the all-important US Jobs Report will be in focus. Hotter-than-expected wage growth and a steady unemployment rate could reduce bets on a Q1 2024 Fed rate cut. A pickup in wage growth would increase disposable income, fueling consumer spending and demand-driven inflation. A positive consumer spending outlook could force the Fed to maintain a hawkish rate path.

Economists forecast the unemployment rate to hold steady at 3.9%. Significantly, economists expect average hourly wages to increase by 0.3% in November vs. 0.2% in October.

While the Jobs Report is the focal point, US consumer sentiment numbers also warrants consideration. A pickup in consumer sentiment could signal a positive outlook for spending and force the Fed to maintain a hawkish rate path.

Short-Term Forecast:

EUR/USD near-term trends hinge on the US Jobs Report. A better-than-expected US Jobs Report may dampen Fed rate cut bets and support a EUR/USD retreat. Euro area macroeconomic conditions could pressure the ECB to bring forward discussions about rate cuts, another possible headwind.

EUR/USD Price Action

Daily Chart

The EUR/USD held above the 50-day and 200-day EMAs, sending bullish price signals.

A EUR/USD break above the $1.07838 resistance level would give the bulls a run at the $1.09294 resistance level.

German inflation numbers and the US Jobs Report are the focal points.

However, a EUR/USD fall through the 50-day and 200-day EMAs would bring sub-$1.07 support levels into play.

The 14-period Daily RSI, 47.06, suggests a EUR/USD drop to the $1.07000 handle before entering oversold territory.

4-Hour Chart

The EUR/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A EUR/USD move through the $1.07838 resistance level and 200-day EMA would give the bulls a run at the 50-day EMA.

However, a EUR/USD fall through the $1.07500 handle could signal a fall to the $1.06342 support levels.

The 14-period RSI on the 4-hour chart, 39.17, suggests a EUR/USD drop to $1.07 before entering oversold territory.