EUR/USD: Bearish impulsive eyes 1.1800 ahead of US NFP
- EUR/USD renews weekly bottom during six-day downtrend, edges lower of late.
- Firmer Treasury yields back DXY bulls amid covid woes, stimulus deadlock.
- US data keeps tapering tantrums alive during pre-NFP trading lull.
- German Industrial Production, sentiment-relating headlines are important too.
EUR/USD remains pressured near weekly low after a six-day downtrend heading into Friday’s European session. That said, the major currency pair drops 0.10% intraday as bears take a breather around 1.1823 by the press time.
The double whammy of Delta covid variant and US stimulus disappointment recently weigh on EUR/USD prices. Also on the negative side could be the market’s anxiety over US employment data considering the recently escalating chatters over tapering and rate hike, at the Federal Reserve (Fed), as well as hawkish central bank mood elsewhere.
The latest figures from the US jump to the six-month high whereas China unveiled the highest numbers during the current round of the virus. Further, Australian infections keep refreshing the multi-day high. However, central bank policymakers remain optimistic about overcoming the pandemic with stronger figures afterward, which in turn will help them dial back the easy money.
Read: Covid fears are mounting in APAC
Other than the fears of the COVID-19 and expectations of monetary policy adjustments, US Senators’ pushing back the votes on the infrastructure spending bill to the weekend also favor the US dollar. As per the latest update from Reuters, “US Senate Majority Leader Chuck Schumer moves to close debate on $1 trillion infrastructure package; unclear when Senate will vote on passage.”
The bleak sentiment can be witnessed by observing mildly offered stock futures and Asia-Pacific equities. The risk-off mood also underpins the US Dollar Index (DXY) and US Treasury yields. It’s worth noting that the US 10-year Treasury yields rise 1.8 basis points (bps) after jumping the most in 12 days.
Even if the risk-aversion wave favors EUR/USD sellers, July’s US employment data becomes the key for the near-term direction considering the divide among Fedspeak. Should the headline jobs report match upbeat forecasts, the pair can extend the downturn but a negative surprise could help consolidate the latest losses.
Read: Nonfarm Payrolls Preview: Why the dollar could surge in (almost) any scenario
In addition to the US NFP numbers, German Industrial Production for June and headlines concerning covid, as well as US stimulus package, should also be watched carefully.
Technical analysis
The EUR/USD pair’s failures to cross the 1.1900 threshold during the late July’s rebound, not to forget sustained trading below 50-DMA level of 1.1930, back sellers amid recently downbeat MACD histograms. However, a clear downside break of 21-DMA, surrounding 1.1825, becomes necessary for the quote’s further weakness.