As of Thursday, the EUR/USD currency pair closed at about 1.1430. Consider that earlier on the day, it was briefly trading above the 1.1500 level. U.S. economic data releases provided the catalyst for this move. From our trading desk’s perspective, it was these reports that most dramatically moved market sentiment and trading behaviors.
This dramatic movement up and down in the EUR/USD currency pair can be explained largely by a few major economic indicators. US Initial Jobless Claims surged higher than expected to 247k versus 239k prior. This jump is another sign of possible softness to come in the labor market. This week’s soaring Nonfarm Productivity claims in tandem with a 1.5% decrease in US Q1 Nonfarm Productivity. This disturbing trend is bad news indeed for United States economic prosperity. Further, the Unit Labor Cost for the same quarter jumped 6.6%, a sign that employers are absorbing more costs.
As traders await the release of the US Nonfarm Payrolls report due out on Friday, they are understandably nervous. Given these challenges, the report will provide tremendous insight into employment trends. It can have a very significant impact on the USD’s value relative to other currencies.
The European Central Bank (ECB) has dominated the airwaves with its moves to cut its three main interest rates. All three rates decreased by 25 bps, as widely expected by the market. Having already raised the main refinancing operations rate to 2.15%. As for the other two monetary policy tools, the marginal lending facility rate and the deposit facility rate stand at 2.4% and 2%, respectively. So far this hawkish cut seems to have given a boost to the euro, allowing it to rally back from serious earlier losses today.
With all these developments, EUR/USD has given up a good amount of its bullish momentum. The analysts feel the downside is still more limited, with support seen at 1.1410, 1.1375 and 1.1330 levels. The technical picture The 20 Simple Moving Average (SMA) for EUR/USD sits at 1.1410, offering a key level for traders to watch.
In the early hours of the American trading session, EUR/USD rocketed higher. This was supported by positive readings from the Eurozone and a string of US misses. This unique combination of factors is what made the duo successful as traders were able to react to real-time information.
Looking ahead, market participants will continue to monitor economic indicators closely, especially those related to employment and productivity in the US. The upcoming Nonfarm Payrolls report will be particularly crucial, as it could either reinforce or challenge current market trends for the EUR/USD pair.