EUR/USD Forecast – Cooler US Jobs Report Likely to Escalate Upside Momentum

The Euro is inching lower against the U.S. Dollar in a tight trading range on Friday as traders await the release of the U.S. Non-Farm Payrolls report for November. Earlier in the session, the single currency touched its highest level since June 28.

At 10:52 GMT, the EUR/USD is trading 1.0526, unchanged. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.07, up $1.06 or 1.11%.

Stripping out the noise, the divergence in monetary policy between the European Central Bank (ECB) and the Federal Reserve is making the Euro a more attractive currency than the U.S. Dollar. The ECB is expected to be more aggressive with its rate hikes while the Fed is expected to slow its rate rises.

Euro Zone Producer Prices Fall More than Expected M/M in October

Euro Zone producer prices fell more than expected month-on-month in October and decelerated sharply year-on-year, underlining economists’ expectations that inflation may have peaked.

The European Union’s statistics office Eurostat said prices at factory gates in the 19 countries sharing the Euro fell 2.9% month-on-month in October for a 30.8% year-on-year rise, decelerating from a 41.9% annual increase in September.

US Economic Data with Non-Farm Payrolls in the Spotlight

Data on Thursday including falling U.S. job openings and contracting U.S. manufacturing activity, raised fresh hopes of easing cost pressure and added to evidence that Fed rate hikes may have cooled the economy. Also supporting this notion was the lower-than-expected PCE Price Index. Meanwhile, consumer spending remained strong.

Economists polled by Reuters expect data out at 13:30 GMT to show the U.S. economy created 200,000 new jobs in November, the smallest number since December 2020. Payrolls rose by 261,000 in October. Average Hourly Earnings are expected to have risen 0.3% and the Unemployment Rate is forecast to come in unchanged at 3.7%.

Daily Forecast

A soft labor market report is expected to be bearish for the U.S. Dollar, which could drive the Euro higher. Bullish EUR/USD traders would like to see a lower-than-expected payrolls number and a rise in the unemployment rate.

Technically speaking, the key resistance to overcome is the long-term Fibonacci level at 1.0560. Taking out this level could lead to a quick test of the June 27 main top at 1.0615.

Sellers could come in on the first test of 1.0615, but overcoming this price could trigger an acceleration to the upside with the June 9 main top at 1.0774 the primary upside target.