EUR/USD Eyeing Key Support Test Ahead of NFP

EUR/USD PRICE, CHARTS AND ANALYSIS:

EUR/USD FUNDAMENTAL OUTLOOK

EURUSD faced continued selling pressure this morning around the 1.090 level following a failed attempt to test the 1.1000 psychological level yesterday. We have seen a slight shift in sentiment over the last day and a half which has resulted in modest gains for the US Dollar as it regains its haven appeal.

The modest gains recorded by the US Dollar have come despite labor market data showing signs of a slowdown with the Jolts job openings figure dropping below 10 million (first time since May 2021) while the ADP data missed estimates yesterday. It’s difficult to pinpoint one particular event affecting risk appetite at present with ongoing US-China tensions, Banking sector fears and recessionary fears all likely playing a part. Given the lack of high impact data ahead of tomorrow’s NFP release overall sentiment and its effect on the Dollar is likely to drive EURUSD for the rest of the day.

EURO AREA PMI DATA

This morning did bring some low impact data out of the Euro Area and Germany, with the S&P global construction PMI. The Euro Area dropped to 45.0 in March from 47.6 in February the sharpest decline in 3 months. New business meanwhile declined at its fastest rate since December with the rate of job shedding the strongest since September 2022. Input cost inflation showed signs of a slowdown in what can be seen as a positive. The decline in all other areas could be a sign of the lagging effect of the ECBs hiking cycle and could stoke fears of a recession should the ECB follow up on its ongoing hawkish rhetoric of late.

Looking ahead at the remainder of the week, the NFP data tomorrow and more importantly average hourly earnings will be key to the direction of EURUSD heading into next week. However, it is important to keep in mind what we have seen this week already with the Dollar strengthening despite weak Jolts and ADP data. A miss to the downside on the NFP print could still see the dollar strengthen if haven demand remains in play.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

From a technical perspective, EURUSD has stair-cased its way higher since a double bottom print on March 15. The 1.1000 psychological level looked like a certainty yesterday before we saw haven demand provide support to the dollar.

Price action however remains bullish with a break and daily candle close below the 1.0840 handle needed for a change in structure to occur. That would bring support at the 1.0800 and 1.0750 levels into focus.

EUR/USD Daily Chart – April 6, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda