EUR/USD Displays Resilience Amidst Market Fluctuations

In a turn of events, the EUR/USD pair rebounded during the latter half of Thursday’s European session, recuperating from its earlier dip to 1.0780, the lowest level since December 13. Closing on a positive note, the pair currently maintains its position above the 1.0880 area as the near-term outlook suggests a bullish trend. The intriguing dynamics in play are further heightened by the imminent release of key economic indicators, notably the Non-Farm Employment Change, Average Hourly Earnings (m/m), and the Unemployment Rate, set to unfold today.

The strategic analysis points toward a potential pullback before definitively breaching the dynamic resistance of the range channel, setting the stage for a robust upward trajectory towards our target point.

The US Dollar, however, found itself on shaky ground during Thursday’s American session. This was attributed to declining US Treasury bond yields, spurred by lackluster employment-related data releases. Notably, Weekly Initial Jobless Claims rose to 224,000, marking the highest figure since early November. The ISM Manufacturing PMI survey further contributed to the Dollar’s decline as the Employment Index dropped to 47.1 in January from 47.5 in December.

As the market eagerly awaits the Nonfarm Payrolls (NFP) report, expectations are set at a forecasted rise of 180,000. During the post-meeting press conference on Wednesday, Federal Reserve Chairman Jerome Powell hinted at potential rate cuts sooner than anticipated if unexpected weakening in the labor market occurs.

An NFP reading below 150,000 may reignite expectations for a rate cut in March, resulting in continued weakness for the USD against its counterparts. Conversely, a figure exceeding 200,000 could delay the policy pivot to May, potentially triggering a rebound for the USD in the American session.

According to the CME FedWatch Tool, the probability of a 25 bps rate cut in March currently stands at 37.5%, while it reaches 60% for May, reflecting the market’s anticipation of potential shifts in the Federal Reserve’s monetary policy.