The EUR/USD currency pair had a tumultuous week as new economic data indicated both strong recovery and potential warning signs. Even more good news came in April when the pair created 177,000 new job positions, easily blowing past the projected 130,000. Even with this pleasant surprise on the Nonfarm Payrolls (NFP) report, the rest of the employment-related figures were pretty lackluster. The Unemployment Rate remained unchanged at 4.2%, in line with expectations. Annual wage inflation, as measured by Average Hourly Earnings, remained stuck at 3.8%, lower than the expected 3.9%.
The recent employment data provided a glimmer of hope for the EUR/USD, yet it was overshadowed by other economic indicators that pointed toward potential challenges ahead. Even last year, these were factors that accelerated recovery, including a contraction in the U.S. GDP and a decline in consumer confidence. Traders digested this mixed bag of economic news. Consequently, the EUR/USD moved to close at near 1.1350 but with moderate selling pressure for the second consecutive week.
Job Market Dynamics
Friday’s Nonfarm Payrolls report offered a critical handoff from the surge in job creation for the EUR/USD. That means 177,000 net new jobs were created that month. This was beyond what many expected and provided a much-needed ray of sunshine in a gloomy economic climate.
Countering this bump in employment figures, wage inflation was a sign of a more tempered future. The Year over Year change in Average Hourly Earnings – the key measure – was unchanged at 3.8%, short of the expected 3.9%. This halt in wage growth may create headwinds for consumer spending going forward.
“I got to say just one thing about today’s [news], that’s the best negative print I have ever seen in my life.” – Peter Navarro
As of September, the unemployment rate has held at a low 4.2%. This is a strong sign that new job creation is booming. Other opposing trends are muddying the waters of the labor market.
Economic Indicators Under Scrutiny
Besides employment figures, another major economic indicator that has played a role in the EUR/USD’s performance. U.S. GDP actually shrank by 0.3% on an annualized basis. This was a markedly bad outcome, down much worse than the anticipated 0.4% growth. This transition represented a deep cut from the preceding quarter’s expansion of 2.4%. It’s just a little disconcerting, given the backdrop of larger economic malaise.
Consumer confidence took a devastating blow as well, dropping to 86 in April—the lowest point since October 2021. Consumers say they’re more concerned than ever about their ability to weather a financial storm and the future of the economy. This drop makes a tough situation for the EUR/USD even tougher.
On the one hand, inflationary pressures are still very much on display, though they seem to be cooling. The core annual Personal Consumption Expenditures (PCE) Price Index rose by 2.6%, down from the previous month’s increase of 3% and aligning with analysts’ estimates. In April, the Harmonised Index of Consumer Prices (HICP) shot up to 2.2% y-o-y — well above all forecasts. So this jarring jump raises new concerns about how inflation may be changing consumers’ purchase decisions.
Technical Analysis and Market Outlook
Technical indicators for EUR/USD are sending neutral signals as the pair evolves above all of its moving averages. Just as clear is the bullish trend. An upward sloping 20 Simple Moving Average (SMA) well above the 100 and 200 SMAs. The Relative Strength Index (RSI) has consolidated around 70, suggesting that while upward momentum is present, it may be entering overbought territory.
Despite EUR/USD correcting lower, current signals suggest that this downward correction may be over. And even at close to 1.1400, immediate resistance remains stout. Beyond that, we face additional resistance around 1.1470 and a yearly high at 1.1573. On the downside, support levels are seen at just above the 1.1300 mark and then at 1.1260 lower.
Market analysts are certainly watching global trade developments with great interest. They are looking forward to the next Federal Reserve monetary policy announcement as both events are likely to significantly affect the EUR/USD pair’s direction in the near term.