EUR/USD Forecast: Navigating Uncertainty – Analysis of EUR to USD Trends Post Jobs Report

Highlights

• The EUR/USD rallied 1.00% on Friday and ended the session at $1.07277.
• On Friday, the US Jobs Report closed the door on the Fed rate hike cycle, sinking US Treasury yields and the US dollar.
• German factory orders and euro area service sector PMIs will garner investor interest on Monday.

Friday Overview

The EUR/USD rallied 1.00%. Following a 0.49% gain on Thursday, the EUR/USD ended the day at $1.07277. The EUR/USD fell to a low of $1.06145 before rising to a high of $1.07467.

German Factory Orders and Euro Area Services PMIs in Focus

On Monday, German factory orders will draw early investor interest. The German manufacturing sector contributes less than 30% to the economy. However, a continued deterioration in sector activity would signal a weakening demand environment. Economists forecast factory orders to decline by 1.0% in September. In August, factory orders increased by 3.9%.

Euro area services PMIs will also need consideration. Revisions to preliminary PMIs for October and PMI numbers for Italy will influence buyer sentiment regarding the EUR/USD. According to the preliminary Survey, the Eurozone Services PMI fell from 48.7 to 47.8 in October. The services sector accounts for more than 70% of the Eurozone economy. Weak figures would fuel recessionary fears.

Notably, a weaker demand outlook could ease pressure on the ECB to keep interest rates higher for longer. The markets may also begin considering the timing of an ECB rate cut.

FOMC Member Commentary in the Spotlight

On Monday, FOMC member commentary could influence sentiment toward the Fed interest rate path. FOMC voting member Lisa Cook is on the economic calendar to speak.

Reaction to the US Jobs Report and forward guidance on interest rates will be the focal points. The markets are betting on an end to the Fed rate hike cycle. Hawkish comments on inflation, the labor market, and the US economy could catch investors by surprise.

Short-Term Forecast:

Near-term EUR/USD trends now hinge on economic indicators from Germany. A marked deterioration in macroeconomic conditions could put an ECB rate cut on the map. However, the Fed pivot remains a tailwind for the EUR/USD despite investors expecting a euro area recession.

EUR/USD Price Action

Daily Chart

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

A EUR/USD hold above the 200-day EMA would support a move to the $1.07838 resistance level.

Euro area economic indicators and Fed speeches are the focal points on Monday.

However, a drop below the 200-day EMA would give the bears a run at the 50-day EMA and the $1.06342 support level.

Weak economic indicators from the euro area and hawkish Fed speeches could sink the EUR/USD.

The 14-period Daily RSI, 62.01, suggests a EUR/USD move to the $1.07838 resistance level entering overbought territory.

4-Hour Chart

The EUR/USD sits above the 50-day and 200-day EMAs, sending bullish price signals. Significantly, the 50-day EMA converged on the 200-day EMA. A bullish cross would signal a possible EUR/USD rally.

A EUR/USD break above the $1.07838 resistance level would give the bulls a run at $1.08.

However, a fall below $1.07 would bring the $1.06342 support level and the EMAs into play.

The 14-period RSI on the 4-hour chart, 69.58, indicates a EUR/USD move to $1.0750 before entering overbought territory.