Key Points:
- US labour market figures likely to determine the near term trend.
- ECB to decide upon their minimum bid rate.
- EUR/USD outlook remains bearish but watch for volatility.
The euro was under pressure early in the prior week as sentiment surged towards the USD following some comments from the Fed’s Janet Yellen which suggested that the requirements for a rate hike had almost been met. Subsequently, it is salient to take a quick look at what occurred last week and what is potentially on the horizon for the pair.
The euro continued to decline throughout most of last week as the pair came under pressure following some comments from the Fed’s Janet Yellen whom suggested that the goals for a September rate hike had almost been met.
In particular, Yellen highlighted the growing strength of the US labour market as a key indicator of coming rate hikes. Subsequently, sentiment surged towards the USD and saw the EUR bid down sharply as expectations of action from the Fed mount.
In addition, the Eurozone CPI data also proved disappointing coming in at a meagre 0.2% y/y which only added to the selling pressure.
Looking ahead, the coming week is likely to focus heavily on the US Unemployment Claims and Beige Book figures as the market grapples with the increasing risk of a rate hike from the Federal Reserve.
Given last week’s poor NFP result of 151k, a strong Unemployment Claims result will be needed to support the Fed’s rhetoric of rate hikes in September. In addition, the release of the Beige Book data may provide some indication of just how close we actually are to seeing a rate hike.
In addition, the ECB is also set to meet this week to determine their direction on the minimum bid rate. Most within the market largely expect the rate to remain on hold at 0.00% but keep a watch on ECB Chair Draghi’s statement following the event as it could cause plenty of volatility for the pair.
From a technical perspective, the pair’s continuing retreat remains in progress and the initial bias this week remains bearish towards support at 1.1042. The RSI Oscillator is still trending lower within neutral territory whilst price action has now moved below the 100-Day moving average.
Subsequently, the pair is likely to remain bearish in the week ahead but watch for any volatility from fundamentals.Support is currently in place for the pair at 1.1121, 1.1042, and 1.0950. Resistance exists on the upside at 1.1365, 1.1426, and 1.1533.
Ultimately, the euro dollar is largely at a crossroads with lots of conflicting economic events occurring over the next seven days. However, it will largely be the US labour market data and its relative strength, or otherwise, that determines the pair’s direction in the days ahead. Subsequently, consider your risk and positioning during the release of the US Unemployment Claims and JOLTS data as you are likely to see some sharp swings.