EUR/USD Forex Technical Analysis – Sellers Encouraged by Fear of Additional Fed Rate Hikes

The Euro fell against the U.S. Dollar on Friday after the release of a better-than-forecast U.S. employment report highlighted a strong labor market that could encourage the Federal Reserve to maintain its aggressive course of interest rate hikes.

On Friday, the EUR/USD settled at 1.0720, down 0.0027 or -0.25%. The Invesco CurrencyShares Euro Trust ETF (FXE) closed at $99.23, down 0.24 or -0.24%.

US Non-Farm Payrolls Report:  Employment Change Rises, Wages Flat

Nonfarm payrolls increased by 390,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs in May.

Additionally, the unemployment rate came in at 3.6%, higher than the forecast, but a match for April’s report. Average hourly earnings were lower than the forecast at 0.3%, matching the previous month’s reading.

The better-than-estimated job increase indicates the economy is still strong, while a dip in average hourly wages suggests growth is starting to moderate amid a rebound in the labor force.

Euro Zone Economic Data Mixed

Euro Zone retail sales were much weaker than expected in April, data showed on Friday, pulled down principally by reduced purchases of food, drinks and tobacco. The decline was particularly marked in Germany, the Euro Zone’s largest economy, where sales dropped 5.4% during the month.

Meanwhile, Euro Zone business growth was robust in May but is at risk of a slowdown from soaring living costs, supply chain disruptions and uncertainty surrounding Russia’s invasion of Ukraine, a survey showed.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0787 will signal a resumption of the uptrend. A move through 1.0627 will change the main trend to down.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is resistance. This area stopped the rally at 1.0787 on May 30.

The minor range is 1.0787 to 1.0627. Its pivot is 1.0707.

The short-term range is 1.0354 to 1.0787. If the main trend changes to down then its retracement zone at 1.0571 to 1.0519 will become the primary downside target.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0707 is likely to determine the direction of the EUR/USD early Monday.

Bullish Scenario

A sustained move over 1.0707 will indicate the presence of buyers. Overtaking 1.0770 will indicate the buying is getting stronger. This could create the upside momentum needed to overcome the main top at 1.0787.

Taking out 1.0787 will reaffirm the uptrend. This could trigger an acceleration into the main Fibonacci level at 1.0868.

Bearish Scenario

A sustained move under 1.0707 will signal the presence of sellers. If this generates enough downside momentum then look for a break into the main bottom at 1.0627.

Taking out 1.0627 will change the main trend to down. This could trigger an acceleration into the short-term 50% level at 1.0571. If it fails then look for the selling to possibly extend into the short-term Fibonacci level at 1.0519.