U.S. Dollar Remains Stable Ahead Of Super Tuesday And Nonfarm Payrolls

 | Feb 29, 2016 07:49AM ET

This week is going to be a busy week in the foreign exchange market as Super Tuesday and Friday's Nonfarm Payrolls report will set the tone for the U.S. dollar. Last Friday the greenback ended higher after U.S. data showed the economy unexpectedly expanded at a faster pace in the fourth quarter, breathing new life into the dollar rally. We are looking for further strength in the USD going into Friday's highly anticipated U.S. labor market report.

While chances for a Federal Reserve rate hike in March are not very high, the option is still on the table, and the FOMC decision to increase rates sooner or later will depend on U.S. data. Payrolls are expected to show a rebound in February while the jobless rate will probably hold steady at 4.9 percent.

Before coming to Friday's risk event the focus turns to Super Tuesday, a key moment in the United States Presidential Election cycle. More than a dozen U.S. states and territories will hold primaries and caucuses on Tuesday and in the Republican race, Donald Trump is expected to do very well. If Tuesday will be super for Donald Trump, it might be the opposite for the U.S. dollar. Consequently, we might see the greenback weakening in the near-term as a Trump win bears risks for the currency.

Apart from payrolls figures, the most important economic data this week will be both ISM Manufacturing and Non-Manufacturing Indices (Tuesday and Thursday), as well as Eurozone Consumer Prices (Monday) and the German labor market report (Tuesday).

Eurozone CPI data, scheduled for release at 10:00 GMT today, is forecast to show a decline, putting pressure on the ECB to ease its monetary policy. Furthermore, U.S. Pending Home Sales (15:00 GMT) may have a short-term impact on the dollar.

Let's have a look at the technical outlook.

EUR/USD

The euro's recent upward channel has been breached downwards and we now shift our focus to the 1.08-mark, an important support level for the EUR/USD. Only a significant break below 1.0780/70 could trigger a fresh downward trend targeting 1.0710/1.0690, 1.0650 and 1.0550. In short-term time frames we see a possible support at 1.0860, whereas upward movements may find a resistance at 1.10 and 1.1020. The next major resistance zone is seen around the 1.1070-level.