EUR/USD Prices Forecast: Facing Uncertainty Ahead of US Non-Farm Payrolls Data

Highlights

• Troubling German data hints at weaker euro.
• Dollar’s six-week win streak under threat.
• U.S. jobs report pivotal for EUR/USD direction.

Tug-of-War: EUR/USD on the Fence Amid Conflicting Signals

The EUR/USD currency pair is caught in a conundrum, trading nearly flat as conflicting economic data and central bank signals pull in opposite directions. While troubling data from Germany hint at a weaker euro, the U.S. dollar is also showing signs of fatigue, raising questions about the trajectory of the currency pair in the near term.

Mixed Signals from the Eurozone

Economic indicators from Germany, Europe’s economic powerhouse, add weight to the bearish outlook for the euro. An unexpected drop in German July retail sales and a higher-than-expected rise in August unemployment rates have overshadowed the impact of recent eurozone inflation data. Isabel Schnabel, a European Central Bank (ECB) board member known for her hawkish views, conceded that the Eurozone’s economic growth is faltering. Furthermore, ECB Vice-President Luis de Guindos hinted at the end of the central bank’s rate-hiking cycle, putting a damper on the prospect of a stronger euro.

The Dollar’s Mixed Bag

Shifting focus to the United States, the dollar’s six-week winning streak against other major currencies is on the brink, especially as it faces a critical monthly U.S. jobs report. A drop in U.S. Treasury yields coupled with soft economic data has weakened the dollar against the euro, but the greenback has held some gains due to the dovish tones from both U.S. and Eurozone central bank officials. The market has reduced its bets on a Federal Reserve rate hike in September to just 12%, down from 18% a week ago, adding an element of uncertainty to the dollar’s future.

Employment Data: The Make-or-Break Factor

Both the euro and the dollar are at the mercy of upcoming employment data. If U.S. non-farm payrolls for August, expected to show an addition of 170,000 workers, miss the mark, the dollar could face a dramatic fall. On the flip side, strong U.S. employment data could put significant downward pressure on the EUR/USD pair.

Short-Term Forecast: Bearish for EUR/USD

Considering the weak economic indicators from Germany and the prevailing uncertainty surrounding both the euro and the dollar, the short-term outlook for the EUR/USD pair leans bearish. With both currencies showing signs of vulnerability, traders will be keenly watching the upcoming U.S. jobs report as a potential tie-breaker in this forex tug-of-war.

Technical Analysis

The EUR/USD’s current 4-hour price of 1.0850 is slightly above its previous 4-hour price of 1.0849. While the price is below the 200-4H moving average of 1.0964, it’s slightly above the 50-4H moving average of 1.0845, indicating a mixed trend. The 14-4H RSI stands at 47.59, suggesting a marginally weakened momentum, but it’s not in the oversold region.

The pair is trading above its main support area (1.0834 to 1.0804) but is considerably below the main resistance area (1.1042 to 1.1065). Overall, the market sentiment for EUR/USD, based on this 4-hour chart data, appears neutral to slightly bearish.