EUR/USD Forecast: US Job Openings and Consumer Confidence in Spotlight

Highlights

• EUR/USD rebounds 0.22% after a 0.15% drop on Friday, ending Monday at $1.08188 despite an early low of $1.07944.
• Downward trend in German consumer confidence would fuel recession fears and pressure the German services sector.
• A fall in US consumer confidence would curb spending, ease inflationary pressures, and support a Fed rate hold.

Monday Overview

The EUR/USD gained 0.22% on Monday. Reversing a 0.15% decline from Friday, the EUR/USD ended the day at $1.08188. The EUR/USD slipped to an early low of $1.07944 before rising to a high of $1.08298.

German GfK Consumer Climate Numbers to Test EUR/USD Levels

This morning, German GfK Consumer Climate and French Consumer Confidence figures will draw interest.

Consumer confidence remains a material consideration, with German consumer confidence fueling recessionary fears. An unexpected slide in confidence would signal weaker consumption and further pressure on the German services sector.

While a softer demand environment would ease demand-driven inflationary pressures, weaker consumption would support the negative economic outlook.

We expect the French consumer confidence numbers to play second fiddle to the German data.

Economists forecast the German GfK Consumer Climate Index to slip from -24.4 to -24.3 for September. However, investors should look beyond the headline number. Steady labor market conditions supported income expectations in the previous month. A fall in income expectations and the propensity to buy would weigh.

Beyond the numbers, investors should monitor ECB Executive Board member chatter. However, no Board members are on the calendar to speak today, leaving ECB commentary with the media to influence.

On Monday, Austrian Governor Holzman discussed monetary policy, favoring further ECB interest rate hikes to tackle inflation. Holzman also downplayed the risk of a recession.

US JOLTs Job Openings and Consumer Confidence to Set the Tone

US consumer confidence and JOLTs Job Openings will be in focus today. After the weak retail sales figures for July, a marked decline in consumer confidence would signal a further curb in consumer spending. Significantly, a negative outlook on spending would ease demand-driven inflationary pressures and support a Fed hold on interest rates.

However, US labor market conditions support consumer confidence at current levels. Wage growth, stemming from a tight labor market, continues to counter Fed efforts to hit disposable income.

A larger-than-expected fall in job openings and quit rates would signal a shift in labor market conditions. We expect increased EUR/USD sensitivity to the numbers as uncertainty toward Fed monetary policy lingers.

Economists forecast the CB Consumer Confidence Index to fall from 117.0 to 116.0, while economists expect job openings to drop from 9.582 million to 9.465 million.

Beyond the economic indicators, investors should monitor the news wires for Fed chatter. While the talk of further Fed rate hikes would deliver dollar support, investors may wait for the Core PCE Price Index, personal spending, and US Jobs Report before taking more decisive moves.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD below the $1.0900 – $1.0850 resistance band. Easing US Treasury yields supported a breakout from the 200-day EMA to bring the 50-day EMA into view.

However, German and US economic indicators would need to diverge in favor of the EUR to support a breakout from the lower level of the $1.0850 – $1.0900 resistance band.

A slump in German consumer sentiment and hotter-than-expected US economic indicators would support a fall through the 200-day EMA to target the $1.0750 – $1.0700 support band.

Considering the 14-Daily RSI at 39.24, the EUR/USD has more room to fall before hitting oversold territory.

4-Hourly Chart

The 4-Hourly Chart affirms bearish near-term price signals. However, a slide in US consumer confidence and weaker-than-expected job openings would support a breakout from the 50-day EMA to target the upper level of the $1.0850 – $1.0900 resistance band.

The 14-4H RSI at 52.28 supports a run at $1.09 before hitting overbought territory.