EUR/USD: Steady as Traders Await Key U.S. Employment Data

Highlights

• EUR/USD remains stable ahead of crucial U.S. employment figures.
• Positive job market data boosts confidence but concerns linger in bond market.
• Outcome of report to influence short-term direction of EUR/USD.

Overview

The EUR/USD remained steady on Friday as market participants eagerly awaited the release of U.S. employment figures, which could potentially confirm that interest rates will remain higher for an extended period. The highly anticipated U.S. nonfarm payrolls report is scheduled to be unveiled at 12:30 GMT, with analysts predicting the creation of 240,000 jobs in June.

Earlier data from Thursday indicated a robust performance in the job market, as private payrolls experienced a substantial surge. Additionally, the number of Americans filing new claims for unemployment benefits increased only moderately last week, further bolstering the notion that the employment sector is on a solid footing.

These developments have propelled short-dated Treasury yields to their highest level since 2007, reflecting the prevailing belief that the Federal Reserve will persist in raising rates to rein in inflation. Moreover, the dollar has gained extra support from the upward movement in two-year Treasury yields, which are especially responsive to shifts in interest rate expectations. Notably, the two-year Treasury yield approached 5% on Friday, nearing the previous day’s 16-year high of 5.12%.

Nevertheless, concerns persist within the bond market regarding the potential impact of the U.S.’s restrictive monetary policy on the overall economy. In fact, some experts still anticipate that the U.S. economy may enter a recession later this year.

In summary, market participants are closely monitoring the U.S. employment figures, as they have the potential to shape interest rate expectations. While positive job market data has boosted confidence in the U.S. economy, there remains a degree of apprehension within the bond market regarding the effects of tighter monetary policies. The outcome of the report will likely have a significant impact on the short-term direction of the EUR/USD, and traders will be watching closely for any bullish or bearish signals in the aftermath.

Technical Analysis

The EUR/USD market is currently showing signs of  bullish sentiment. The 4-hour price has increased from the previous close, indicating an upward trend. The price is trading above the 200-4H moving average, suggesting a positive long-term outlook. However, it is below the 50-4H moving average, which may act as a resistance level. The 14-4H RSI is at a neutral reading, indicating a balanced sentiment among traders.

Main support lies between 1.0808 and 1.0849, while main resistance is seen between 1.1006 and 1.1074. Overall, the market is leaning towards a bullish outlook, but monitoring price action and key levels is advised. A breakout above the 50-4H at 1.0898 could confirm the start of a near-term rally.