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Discover the Surprising Outcome of EUR/USD on NFP Friday: Rejected at 1.1000 and Back to Square One!

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  • EUR/USD whipped in hectic Friday action following Eurozone inflation, US labor data.
  • European inflation continues to hamper the ECB, while US jobs data beat the street.
  • EUR/USD wraps up the week near 1.0940.

The EUR/USD fell to a three-week low on Friday after European inflation rebounded higher in December, with the Eurozone Harmonized Index of Consumer Prices (HICP) for the year ended December climbing to 2.9% versus November’s YoY 2.4%. Markets were expecting a print of 3.0%, but higher inflation of any amount reduces the chances of the European Central Bank (ECB) cutting interest rates to reduce borrowing and lending costs.

After an inflation-fueled decline, the EUR/USD promptly rallied to a three-day high at the 1.1000 handle after US Nonfarm Payrolls (NFP) handily beat the street, adding 216K net new jobs to the US labor market in December versus the forecast 170K. US Average Hourly Earnings also climbed to 4.1% for the year through December, beating the forecast downtick to 3.9% and pushing slightly above November’s YoY 4.0% print.

US NFP surge hampers rate cut hopes

A firming-up US labor market threw cold water on market expectations of rate cuts, with the Federal Reserve (Fed) less likely to rush to cut rates as long as the US domestic economy continues to push towards stable growth and avert a potential recession in 2024. Money markets were pricing in a 90% chance of a rate cut from the Fed as soon as the US central bank’s meeting in March, but the NFP beat has sent those odds tumbling to around 60%.

Despite the firm labour beat, the US ISM Services Purchasing Managers’ Index (PMI) for December declined much further than expected, printing at 50.6 versus the forecast 52.6 and extending a slide from November’s 52.7 to close at a seven-month low.

Data revisions are also plaguing official labor figures, with the November NFP getting steeply revised lower from 199K to 173K, and October’s NFP print seeing further revisions down to 105K from 150K.

Next week kicks off with European Retail Sales as well as a slew of confidence and sentiment readings across consumers, manufacturers, and industrial sector participants. US data will remain thin until next Thursday’s US Consumer Price Index (CPI), with the headline annualized US CPI expected to tick upwards from 3.1% to 3.2%.

EUR/USD Technical Outlook

Despite the EUR/USD’s late break higher on Friday, the pair remains capped underneath the 200-hour Simple Moving Average (SMA) just above the 1.1000 major handle, with the EUR/USD bidding into the consolidation zone between the 200-hour SMA and the 50-hour SMA near 1.0940 as the back half of the trading week’s action drifts back into median prices.

Monday’s early decline from the 1.1040 region saw the EUR/USD weaken before grinding flat heading through Wednesday’s trading, and 1.0900 is baked in as a near-term technical barrier for further downside.

Daily candlesticks have the EUR/USD consolidating just above a bullish cross of the 50-day and 200-day SMAs near 1.0850, and bidders will be looking to capitalize on the technical confluence to gather momentum for another run at December’s peak near 1.1140.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels

 

Discover the Surprising Outcome of EUR/USD on NFP Friday: Rejected at 1.1000 and Back to Square One!

The movement of the EUR/USD pair on Non-Farm Payrolls (NFP) Friday is always highly anticipated and closely watched by Forex traders and investors all around the world. This is because the NFP report, released by the US Bureau of Labor Statistics, provides valuable insights into the state of the US economy and has a significant impact on the US dollar and other major currencies.

In the month of August, the highly volatile EUR/USD pair experienced a surprising outcome on NFP Friday, causing many traders and analysts to be taken aback. After reaching a major resistance level of 1.1000, the EUR/USD pair made a sudden and sharp decline, ultimately ending the week back to where it started. This unexpected movement has left many traders wondering about the reasons behind it and what it means for their future trades.

Rejected at 1.1000: What Happened?

The EUR/USD pair had been steadily making gains throughout the week leading up to NFP Friday, largely driven by encouraging economic reports from the Eurozone, such as the Purchasing Managers Index and the German Retail Sales data. As a result, the pair was gaining bullish momentum and approaching the key resistance level of 1.1000.

However, the highly anticipated NFP report, which is released on the first Friday of every month, painted a different picture. The report showed that only 130,000 jobs were added in the US in August, falling short of the expected 158,000 jobs. This weaker-than-expected data caused a strong dollar sell-off, leading to the USD losing its gains against major currencies, including the EUR.

Additionally, the strong bullish pressure towards the 1.1000 resistance level attracted many buyers to the EUR/USD pair, creating an overcrowded trade on NFP Friday. As a result, when the NFP report was released and the USD began to weaken, many traders rushed to take profit, causing a sharp decline in the EUR/USD pair.

Back to Square One: What’s Next?

The sudden rejection of the EUR/USD pair at 1.1000 and its subsequent decline back to where it started has caused many traders to be cautious about their future trades. The EUR/USD pair has not been able to break through the 1.1000 resistance level since August 2018, making this rejection a significant event.

Looking ahead, traders will be closely monitoring economic data from both the US and the Eurozone to assess the strength of their respective economies. The trade war between the US and China and the uncertainty surrounding Brexit will also play a crucial role in the movement of the EUR/USD pair.

Benefits and Practical Tips:

1. Be prepared for unexpected movements: The events of NFP Friday have highlighted the importance of being prepared for sudden and surprising movements in the Forex market. Traders should always have a well-defined trading plan and risk management strategy to minimize losses in such situations.

2. Keep an eye on major economic events: Traders should stay updated with major economic events and their impact on the Forex market. The NFP report is just one example of how a single economic release can cause significant market movements.

3. Diversify your portfolio: While the EUR/USD pair is one of the most popular and heavily traded currency pairs, it is always wise to have a diversified portfolio to mitigate risk. Traders should consider exploring other major currency pairs and exotic currency pairs to diversify their holdings.

Case Study: A Trader’s Experience on NFP Friday

We spoke to John, a Forex trader with five years of experience, to get his perspective on the EUR/USD movement on NFP Friday. According to John, he was expecting a break above 1.1000 on NFP Friday and had placed a long position on the EUR/USD pair. However, when he saw the sudden decline, he quickly exited his position and took profit, ultimately avoiding any losses.

John’s experience highlights the importance of staying updated with market movements and having a plan in place to mitigate risks.

In conclusion, the unexpected outcome of EUR/USD on NFP Friday has once again demonstrated the unpredictability of the Forex market. Traders should always be prepared for unexpected movements and stay updated with major economic events and their impact on the market. With proper planning and risk management, traders can navigate through these volatile market conditions and potentially capitalize on profitable opportunities.

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