- Since mid-trading last week, the price of the EUR/USD has been on an upward retracement with gains reaching the resistance level of 1.0746, the highest for the pair in seven weeks.
- In the beginning of trading this week, it is stabilizing around 1.0735, awaiting any new developments.
- Therefore, the gains in the pair came as job growth in the United States slowed more than expected and the unemployment rate rose to its highest level in nearly two years at 3.9%, suggesting that strong employer demand for workers is starting to wane.
Hawkish Federal Reserve
Recently, the latest figures suggested that some cracks are beginning to form in the US Labor market, which has been gradually returning to normal thanks to an improvement in Labor supply over the past year and a slowdown in the pace of hiring.
For his part, Federal Reserve Chairman Jerome Powell hinted that the central bank may have now finished the most aggressive tightening cycle in four decades after holding off on raising interest rates for the second policy meeting in a row. Even when the pandemic drove home prices up faster than ever before, cheap mortgages kept buyers in the game. Now a whole new affordability crisis has begun. And this time, there is no clear way out. Meanwhile, the Federal Reserve's tightening policy since last year has pushed 30-year mortgage rates to nearly 8%, their highest level in nearly a quarter-century.
On the other hand, inflation in the euro zone fell to its lowest level in more than two years as the bloc's economy contracted after an unprecedented rise in interest rates. Also, the data shows that while the ECB's ten consecutive increases have helped bring inflation back towards its 2% target, they have also affected households and businesses by sharply raising borrowing costs. German output contracted in the third quarter, raising the risk that the bloc's largest economy is heading for a recession. Meanwhile, the data highlights Germany's struggle to recover from the energy-driven recession last winter, which was followed by two quarters of recession or minimal growth.
EUR/USD Today Expectations and Analysis
Based on the performance on the daily chart below, the EUR/USD currency pair is on an upward retracement that has broken the overall downtrend and reached the first target we identified in recent technical analyses of the pair. Now, attention is turning to the psychological resistance level of 1.0800, which could give the bulls a lot of positive momentum and control. Therefore, this requires more investor risk appetite as the US dollar remains as safe haven and global geopolitical tensions are on the rise. On the other hand, according to the performance over the same period, a break of support at 1.0620 is a threat to the current upward retracement of the EUR/USD pair. Today, the focus will be on the release of the reading of the purchasing managers' index for the services sector for the economies of the euro zone. And although the US jobs report at the end of last week had the strongest impact.
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