The EUR/USD pair rallied on Friday after the release of weaker-than-expected US Nonfarm Payroll (NFP) data, which fueled concerns about a potential economic slowdown in the US. The market’s risk-off sentiment led to a broad decline in equities and a flight to safe-haven assets, causing the US Dollar to tumble across the board.
Key Data Points:
US NFP: The US economy added only 114K net new jobs in July, significantly below the forecasted 175K. The previous month’s figure was also revised downward to 179K from 206K.
US Unemployment Rate: The unemployment rate rose to 4.3%, its highest level since November 2021, further indicating a weakening labor market.
Average Hourly Earnings: Wage growth also slowed, with average hourly earnings increasing by 0.2% month-over-month, below the expected 0.3%.
Market Reaction:
The disappointing US NFP data sparked fears of a broader recession in the US economy, prompting a sell-off in risk assets and a surge in demand for safe-haven currencies like the Euro. Market expectations for a Federal Reserve (Fed) rate cut in September have solidified, with some traders now anticipating a more aggressive 50 basis points cut.
Looking Ahead:
Next week’s focus will be on the July ISM Manufacturing PMI figures and pan-European Retail Sales data for June. These releases could provide further insights into the global economic outlook and influence market sentiment.
Technical Analysis:
The EUR/USD pair has broken out of a descending channel on the daily chart, but it still needs to overcome resistance at 1.0950 for a sustained upward move. If buyers can maintain momentum, the pair could potentially retest the 200-day Exponential Moving Average (EMA) at 1.0802. Conversely, sellers will be looking to push prices back below 1.0700.
