The Euro is trading sharply lower on Friday and is currently in a position to deliver its biggest weekly drop in three weeks after a jump in U.S. payrolls dampened the chances of a Fed rate cut at the end of July.

According to the U.S. Labor Department, the U.S. economy added 224,000 jobs amid concerns that both the employment picture and overall growth picture were beginning to weaken. The unemployment rate edged up to 3.7% as the labor force participation rose. The closely watched Average Hourly Earnings disappointed, rising 0.2% on a monthly basis against expectations for 0.3% growth. Over the past 12 months, wages were up 3.1%, also a notch below market estimates of 3.2%.

Traders were looking for payrolls to rise 162,000 and the unemployment rate to hold steady at 3.6%. Furthermore, May’s dismal 75,000 jobs increase was revised lower to 72,000.

At 12:57 GMT, the EUR/USD is trading 1.1247, down 0.0037 or -0.33%.

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 1.1413 on June 25. Today’s early price action reaffirms the shift in momentum.

The main trend will change to down on a trade through 1.1181. A move through 1.1413 signals a resumption of the uptrend.

The short-term range is 1.1107 to 1.1413. The EUR/USD is currently testing its retracement zone at 1.1260 to 1.1224. This zone is controlling the near-term direction of the EUR/USD.

The main retracement zone resistance comes in at 1.1278 to 1.1318.

On the downside, the major longer-term Fibonacci support is 1.1185.

Daily Technical Forecast

Based on the early price action, the direction of the EUR/USD the rest of the session will be determined by trader reaction to the 50% level at 1.1260.

Bearish Scenario

A sustained move under 1.1260 will indicate the presence of aggressive counter-trend sellers. If the downside momentum continues then look for the selling to continue into the short-term Fibonacci level at 1.1224. Since the trend is up, look for buyers to show up on the first test of this level. This is a potential trigger point for an acceleration into 1.1185 and 1.1181.

Bullish Scenario

Regaining 1.1260 will signal the return of buyers. This could trigger a surge into 1.1278. This 50% level is a potential trigger point for an acceleration to the upside with the next target the main Fibonacci level at 1.1318.