EUR/USD Forex Forecast – Strengthens as US Labor Data Suggests Easing Inflation Pressures

On Friday, the Euro strengthened against the U.S. Dollar following U.S. labor data that showed slower wage growth, indicating a potential easing of inflation pressures.

The U.S. economy added jobs in February, but slower wage growth and a rise in the unemployment rate lowered expectations for a 50-basis point rate hike when the Federal Reserve meets on March 22.

This news caused Treasury yields to fall, reduced the appeal of an already strong dollar, and sparked a rally in government bonds across the euro zone.

The EUR/USD settled Friday’s session at 1.0639, up 0.0057 or +0.53%. The Invesco CurrencyShares Euro Trust ETF (FXE) finished at $98.16, up $0.54 or +0.55%.

Euro Zone Government Bond Yields Tumble on Risk Concerns

Government bonds across the euro zone rallied on Friday, winning a reprieve from rate-rise expectations for now as a selloff in U.S. bank stocks boosted demand for safe-haven assets.

This news caused Germany’s two-year bond yield to slide almost 20 basis points, fueling its biggest one-day fall since July, as its price shot higher.

Fueling the flight-to-safety was the collapse of SVB Financial Group. It tried to reassure clients after a capital raise led to its stock collapsing 60%, which contributed to wiping out over $80 billion in value from bank shares.

Daily EUR/USD Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out 1.0695. A trade through 1.0524 will change the main trend to down.

The nearest resistance is a pivot at 1.0661, followed by 1.0783. The closest support is a main bottom at 1.0483, which is also the low for the year.

Daily EUR/USD Technical Forecast

Trader reaction to the pivot at 1.0661 is likely to determine the direction of the EUR/USD early Monday.

Bullish Scenario

A sustained move over 1.0661 will indicate the presence of buyers. Overtaking a minor top at 1.0705 will indicate the buying is getting stronger. This could trigger a surge into a resistance cluster at 1.0783 to 1.0804.

Bearish Scenario

A sustained move under 1.0661 will signal the presence of sellers. If this generates enough downside momentum then look for a break into the main bottom at 1.0524, followed by the main bottom at 1.0483.