The single currency has lifted the EUR/USD currency cross out of a three-day losing streak. It recovered from a two-week low and pushed up over the 1.1300 level during European trading on Friday. In short, traders are eager to take profits on the US Dollar. They are re-positioning themselves ahead of, to say the least, the most awaited US Non-Farm Payroll (NFP) release.
As we noted earlier this week, the EUR/USD has been under extreme downside pressure, trading to levels not seen in more than two weeks. On Friday morning, the duo began healing their wounds. On Friday they rose back above that important psychological level at 1.1300. Analysts cite real profit-taking on the US Dollar itself as a major underlying cause in this movement. They equally read into a lot traders being tactically repositioning before Friday’s upcoming US employment data.
The recent US Dollar collapse has been a primary force behind this recovery. With the traders booking profit on the dollar’s prior strength, the EUR/USD had sufficient momentum to make the most of this play. Earlier this week, a torrent of positive economic indicators were released, further painting the picture of a strong U.S. economy. In response, the dollar soared. That profit-taking trend has inadvertently helped the euro regain a bit of competitiveness in the forex market.
Moreover, the upcoming release of the US NFP has increased market volatility. Traders tend to be on the defensive ahead of such major economic releases, which can create volatility and movement across currency pairs. Most observers think this is market participants re-positioning. In other words, they are bracing for a lot of potential volatility due to the NFP report. This strategic monetary policy pivot has bolstered the recovery of the EUR/USD rate even more.
As European markets opened on Friday, traders started to feel a bit more confident. As risk appetite improved, the EUR/USD strengthened sharply through the day, rising above 1.1300. This level represents a key psychological barrier for market stability. If it is sustained, we can expect the euro to keep climbing against the dollar in the near future.
Looking ahead, market participants will closely monitor both the EU Consumer Price Index (CPI) and the US NFP data releases. Unsurprisingly, these indicators are extremely important in determining the direction of future monetary policy and would have an outsized impact on currency movement. The NFP report, in particular, is expected to provide insight into employment trends in the United States and could sway investor sentiment regarding the dollar’s strength.