EUR/USD is undergoing downside pressure still, having slipped back under the 1.1400 level during European trading hours Tuesday. It is because of the reaction and sensitivity of the currency pair to the US Dollar’s continuing recovery. Combined with a grinding macroeconomic recovery, this rebound has made the Euro a less attractive investment. Traders held back in anticipation of crucial US jobs data. Their ears are perked to any changes in future economic signals that might lead to a change in currency direction.
The EUR/USD cross opened on the back foot and has failed to pick up the pace since. The present trading context is indicative of this larger trend at multilateral level where the Euro is losing ground against its US dollar twin. Market analysts attribute this performance to a number of key factors. Questionably, they are especially keeping an eye on the next few job reports from the U.S.
Traders are anxiously awaiting the release of this key economic data. Speculation has been rampant as to how this might affect future job creation or GDP growth. Investors are acutely focused on the risk that better than feared jobs data will strengthen the US Dollar, posing additional headwinds to the Euro.
The latest rally of the US Dollar was the most important variable impacting EUR/USD behavior.… Other analysts argue that a mix of factors from Federal Reserve policies to the health of the overall economy have led to the Dollar’s strength. This improvement appears to be driven by increased confidence in the US economic recovery. Could it be driven at least partly by expectations of future hawkish monetary policy shifts.
In comparison, the Eurozone’s challenges could keep downward pressure on the Euro’s value. Inflationary fears, supply chain issues, and the ongoing war in Ukraine have added to the turmoil and volatility on European markets. Traders are keeping a close eye on all of these factors as they look to plot the next move in the EUR/USD pair.
Even more disturbing, the market’s reaction to any economic indicator can be instant and large. The imminent US jobs data will likely be the biggest market mover for the EUR/USD. It will have ripple effects on other currency pairs and global financial markets. An unexpectedly favorable report would feed optimism about a new tone among US policymakers on fiscal and monetary policy. Conversely, negative beats could rattle that belief.
Market participants continue to proceed with caution as they wade through the ongoing change. Like you, many are taking a wait and see approach considering both technical and fundamental indicators that may help them figure out how they want to trade. The balance of power between the Euro and the US Dollar is slanted the other way. Uncertainty looms over the industry and traders are looking for direction.