EUR/USD Analysis: Critical Trading Week – 04 November 2024

-- The Euro to the US Dollar (EUR/USD) exchange rate recorded its first weekly gain in five weeks after disappointing US jobs figures reinforced bets on a rate cut by the Federal Reserve.
-- The US Dollar Index – a measure of the US dollar’s ​​performance against a basket of other major currencies – fell after official figures showed that the United States added just 12,000 jobs in October, well below the consensus forecast of 113,000 and down sharply from 223,000 in September.

According to Forex trading, the Euro to the US Dollar rose to 1.0905 before retreating to 1.0870, bringing the week’s gains to 0.72%.

Meanwhile, financial markets had always expected a slowdown in October due to the hurricanes that hit the southern states. The US dollar might have chosen to ignore this slowdown were it not for some significant cuts in August and September payrolls to 78K and 223K respectively, from 159K and 254K.

Therefore, the cuts in the previous data are where the real story lies, as this data shows a trend of weaker-than-expected results that should bolster expectations for further rate cuts by the Federal Reserve. the experts added, “As it stands, the six-month average in September – before the Boeing attacks and hurricanes – was just 148K, down about 100K from the previous six months. It would not be surprising if this figure was revised downwards as well, given the clear pattern of recent downward revisions,”

A further slowdown in the trend seems likely, as hiring intentions at small US businesses remain subdued, large companies continue to face higher borrowing costs as low-yield corporate bonds mature, and job openings in the health and education sectors have declined. Knut Magnussen of DNB Markets said the large negative revision to total payroll growth in August and September suggests that the recent trend in employment is weaker than the September reading a month ago. “We expect the Fed to ignore the noise and continue with its 25bp cut this week. The 10-year yield fell by around 5bp after the release, and now the 25bp cut has been fully priced in by the markets,” he added.

According to the forex market, the US dollar has been rallying in October in response to a series of better-than-consensus US economic data that has seen a sharp decline in bets on a Fed rate cut. Thus, these figures could put a lid on this trade, which could support the EUR/USD pair.

However, Dr. Thomas Gitzel, chief economist at VP Bank, cautions that we are by no means witnessing a collapse in the US Labor market. “If we exclude one-off effects, employment growth remains robust,” he explains. Despite the weak increase in employment, there are still clear signs of weakness. The Labor market reflects the strong performance of the US economy. Despite the Fed’s rate hikes, there are no signs of an economic slowdown.”

Regarding the Fed’s rate cut this week, he says the move has always been “steady.” He added, “The range of interest rates is well above the current rate of inflation, so there is room for monetary easing regardless of Labor market developments. A healthy economy and a strong Labor market therefore have medium-term rather than short-term implications. Even if rate cuts continue next year, key interest rates are unlikely to return to pre-coronavirus levels at this time.”

Also, the next major event for the US dollar will be the US elections this week, with analysts saying a Donald Trump victory could boost the dollar. If his Republican Party wins Congress, the move could be exacerbated. Meanwhile, economists agree that the US dollar will fall sharply if Kamala Harris wins, which would erase the recent “Trump trade” premium that has built up in currency markets.

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EUR/USD Technical analysis and forecast:

We expect the EUR/USD pair to remain in its current range with a bearish bias until the reaction to the announcement of the crucial US data. Also, events this week led by the US presidential election results and then the US Federal Reserve's announcement of updating its monetary policy decisions. Furthermore, the bias for the EUR/USD pair will remain bearish as long as it is close to the support level of 1.0800. Ultimately, there will be no initial break of the downtrend without moving above the psychological resistance of 1.10000.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.