Risk Appetite Grows After U.S. Jobs Report. Fed Rate Next
EUR/USD: Bullish Pressure Subsides. Bears Ready to Step In.
U.S. stocks and indices rallied throughout last week and even more so Friday when the U.S. NFP report posted better-than-expected numbers. The report showed that 177K new jobs were created during the previous month, surpassing the forecast of 138K and indicating that the U.S. economy is more resilient than previously thought.
The tariff situation seems to be improving or at least there are more and more signs that the phase of spiraling out of control has passed. According to China’s Commerce Ministry, Beijing is evaluating the offer to get together with U.S. representatives and discuss the tariffs. If a solution is reached, the market situation will become a lot clearer. However, we are not quite there yet but willingness to negotiate is the first step.
Economic Calendar Highlights
The U.S. Services PMI will come out Monday at 2:00 pm GMT, showing the opinions of purchasing managers about the overall state of business conditions in the Services sector. This is not a high-impact economic indicator but it can move the greenback, especially if the actual number shows a significant difference compared to the forecast.
The main event of the week will be the U.S. Federal Funds rate announcement, scheduled for Wednesday at 6:00 pm GMT. The Fed is not expected to cut the rate at this meeting, but a surprise would have a huge impact on US Dollar pairs. According to the CME FedWatch tool, there is a 97.2% probability that the rate will remain unchanged at 4.50%. The rate announcement will be followed at 6:30 pm GMT by the usual press conference held by Fed Chair Powell. If he drops any hints regarding the next move, we will surely see strong USD reactions during the press conference.
The Bank of England will announce the interest rate on Thursday at 11:00 am GMT. A cut of 25 bps is expected, from 4.50% to 4.25% BOE’s Governor Bailey is not scheduled to hold a press conference and the rate cut may be already priced into the market.
Technical Outlook – EUR/USD
Friday the Euro bulls tried to take the price closer to 1.1500 but the better-than-expected Non-Farm Payrolls report fuelled the dollar and erased the euro gains.
It looks like the rally has run out of steam for the time being, with immediate resistance sitting at 1.1400. The RSI was overbought several times and it also showed bearish divergence more than once, which combined with the bounce at 1.1500, shows that the pair is headed lower.
The move lower should be considered a pullback in an uptrend at least as long as the price is trading above 1.1200, which is the first major support. If this line is broken, the bears will gain more strength and the uptrend may come to an end.
