Bearish view
- Set a sell-stop at 1.0765 and a take-profit at 1.0700.
- Add a stop-loss at 1.0.825.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 1.0790 and a take-profit at 1.0850.
- Add a stop-loss at 1.0700.
The EUR/USD retreated sharply after the US published mixed non-farm payrolls (NFP) data on Friday. The pair slipped to a low of 1.0773, the lowest point since August 25th.
No major movements ahead
The EUR/USD exchange rate resumed its sell-off after the Bureau of Labor Statistics (BLS) published mixed jobs numbers. According to the bureau, the economy added 187k jobs in August, better than the median estimate of 170k. The additions were better than the 157k created in the previous month.
Another positive thing was that the average weekly hours jumped to 34.4 while the participation rate rose to 62.8%. These numbers mean that the labor market is still healthy.
On the negative side, the unemployment rate rose to a multi-month high of 3.8% while the average hourly earnings dropped to 4.3%. The two figures were weaker than the median estimates of 3.5% and 4.4%.
I believe that the Fed welcomed the unemployment and earnings trends since they will help it in its fight against inflation. Therefore, there is a likelihood that the bank will decide to pause in its September meeting.
Broadly, there are signs that the American economy is softening. For example, delinquencies on auto loans, credit cards, and consumer loans have soared to the highest level since 2012. Also, millions of Americans will start paying back their student loans this month.
The EUR/USD pair also declined after signs that the European economy is slowing emerged. The bloc’s manufacturing sector continued contracting in August.
At the same time, the real estate sector in key countries like Germany is going through a major downturn as liquidity in the bloc dries. While Germany unveiled 7 billion euros worth of tax incentives, analysts believe that the country needs more supportive measures.
EUR/USD technical analysis
The EUR/USD exchange rate has been in a strong bearish trend in the past few weeks. This sell-off continued on Friday after the latest NFP data. As it dropped, the pair flipped the important support level of 1.0836 (June and July low) into a resistance.
The pair has moved below the Ichimoku cloud and the 50-period moving average. It is also approaching the important support at 1.0765, the lowest point on August 25th. The Relative Strength Index (RSI) is approaching the oversold level.
Therefore, the pair will likely continue falling as sellers target the key support at 1.0700. The pair’s price action on Monday will be a bit muted with the US markets being closed.
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