The EUR/USD currency pair hovers below the 1.0400 mark as investors brace for the release of critical US jobs data, which is anticipated to provide fresh insights into the labor market's health. The US Dollar remains resilient against its rivals, with traders closely watching the upcoming Nonfarm Payrolls figures. This data, expected to be released by the United States Bureau of Labor Statistics on Friday at 13:30 GMT, will be pivotal in understanding the current state of the US economy and potential Federal Reserve policy adjustments. Economists predict an increase of 170,000 jobs in January, following December's gain of 256,000, while the unemployment rate is likely to remain steady at 4.1%.
The EUR/USD pair faces technical resistance ahead of the anticipated jobs data, with analysts noting its turnaround from three-week lows of 1.0210 appears capped by the 50-day Simple Moving Averages (SMA) at 1.0408. According to Dhwani Mehta, Asian Session Lead Analyst at FXStreet, the pair's movement is closely tied to these technical levels.
"The EUR/USD turnaround from three-week lows of 1.0210 appears capped by the 50-day Simple Moving Averages (SMA) at 1.0408 in the countdown to the NFP showdown." – Dhwani Mehta, Asian Session Lead Analyst at FXStreet
US economic indicators have regained focus as concerns over trade wars diminish for the time being. The resilience of the US Dollar reflects investor caution as they await the crucial Nonfarm Payrolls data. This data not only holds significance for assessing labor market strength but also influences Federal Reserve interest rate decisions. Despite the anticipation of 46.3 basis points (bps) of Federal Reserve rate cuts by December, markets are keen to see how the labor data will shape monetary policy expectations.
Employment growth in the US private sector saw a rise of 183,000 jobs last month, according to Automatic Data Processing (ADP). However, the Bureau of Labor Statistics (BLS) reported a drop in JOLTS Job Openings to 7.6 million in December, indicating potential shifts in employment trends. These figures underscore the importance of January's jobs data in affirming or challenging current perceptions of the US labor market's robustness.
The Federal Reserve recently removed its statement regarding inflation progress towards its 2% goal, suggesting a cautious approach to policy adjustments. Fed Chairman Jerome Powell emphasized a patient stance.
"we don't need to be in a hurry to make any adjustments." – Jerome Powell, Fed Chairman
The upcoming Nonfarm Payrolls report is expected to offer fresh direction on both Federal Reserve interest rates and the US Dollar's trajectory. Analysts from TD Securities predict that payrolls may lose momentum at the start of 2025 due to temporary shocks.
"Payrolls are set to lose momentum at the start of 2025, with temporary shocks helping to keep the headline gain under the 200K mark." – TD Securities analysts
Additionally, the Bureau of Labor Statistics will unveil material revisions for payrolls and household employment data, which could further influence market perceptions.
Average Hourly Earnings (AHE) are projected to increase by 3.8% year-over-year in January, reflecting ongoing wage growth amidst economic uncertainties. This anticipated rise in earnings could have implications for consumer spending and inflationary pressures, factors closely monitored by policymakers.
As markets look forward to Friday's data release, traders remain cautious about potential volatility in currency movements. The EUR/USD pair's technical outlook remains a focal point for investors navigating these uncertain waters.
"Buyers need a decisive break above the January 30 high of 1.0468 to target the 1.0500 key level. Acceptance above that level is critical to unleashing further recovery toward the static resistance near 1.0535. Conversely, if EUR/USD yields a sustained break of the 1.0300 mark, sellers will then aim for the three-week troughs just above 1.0200." – Dhwani Mehta, Asian Session Lead Analyst at FXStreet