EUR/USD Ends The Week On The Defensive After Failure To Regain Parity
Alex Boltyan | Oct 08, 2022 10:41AM ET
The EUR/USD pair fell to a one-week low on Friday following the release of better-than-expected U.S. nonfarm payrolls data. The pair bottomed at 0.9726 and closed the session at 0.9740, recording a 0.52% daily decline and shedding 0.62% in the week.
The U.S. Bureau of Labor Statistics reported the U.S. economy added 263,000 jobs in September, beating the market consensus of 250,000 but decelerating from its previous reading of 315,000. Meanwhile, wage inflation came in as expected, as Average Hourly Earnings advanced 0.3% MoM, while the unemployment rate dropped to 3.5%.
As an immediate reaction, U.S. bond yields – and the dollar – pushed higher as the markets leaned in favor of a bigger rate hike by the Fed in the next November meeting. The WIRP tool suggests that investors are betting on a 76% probability of a 75 bps hike in the next meeting and on 24% odds of a smaller increase of 50 bps.
Investors will keep an eye on U.S. September’s CPI figures, especially core inflation. Unless inflationary pressures show compelling evidence of a slowdown, FOMC members will most likely fulfill expectations by acting aggressively.
From a technical perspective, the EUR/USD maintains a bearish bias in the short term, according to indicators on the weekly and daily charts.
At the same time, the EUR/USD pair trades below its main daily moving averages after a short-lived bounce seen earlier in the week, while it has returned to the mid-line of the descending channel drawn from February highs.
Immediate support levels could be found at the 0.9635 and 0.9600 areas, ahead of the cycle low of 0.9535. On the other hand, the 20-day SMA offers resistance at the 0.9860 zone, followed by parity and the upper side of the channel around 1.0050.
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