EUR/USD Gains Upper hand on Disappointing US Macro Data

eur-usdThe EUR/USD cleared a key falling trendline hurdle yesterday, opening doors for a stronger corrective rally.

On Thursday, the US Dollar corrected sharply from near 17-month tops hit earlier this week and helped the EUR/USD pair to stage a solid recovery from YTD lows support near the 1.1300 handle. The USD downfall lacked any obvious catalyst and was primarily led by a strong rally in the British Pound on the back of the positive Brexit news. Adding to this, the major upcoming event risk – the US mid-term elections, coupled with disappointing US ISM manufacturing PMI exerted some additional downward pressure and prompted some aggressive USD long-unwinding trade. Meanwhile, the pair rallied nearly 120-pips and surged back above the 1.1400 handle, reversing all of its weekly losses and hitting a fresh weekly high. The USD bulls held on the back-foot through the Asian session on Friday as market participants now look forward to the keenly watched US monthly jobs report – NFP, for some immediate respite.

Investors Await US NFP Data For Directional Cues in Short Term

The US economy is anticipated to have added 190K new jobs in October and the unemployment rate is seen holding steady at 3.7%.As of writing this article, the EURUSD pair is trading at 1.1426 up by 0.17% on the day. The key focus, however, will be on the average hourly wage growth data, expected to have risen 0.2% m/m and 3.1% y/y, marking their largest annual gains since mid-2009. Today’s data will point to further labor market tightening and reinforce market expectations for a gradual Fed monetary policy tightening, even beyond 2018, which might eventually provide a near-term lift to the greenback. US Greenback is also expected to see some downside move over positive headlines relating to Sino-U.S. Trade talks. When looking from technical perspective, overnight strong upsurge helped the pair to decisively break through over two-week-old descending trend-channel.

The up-move now seems to have paused near 23.6% Fibonacci retracement level of the 1.1815-1.1302 recent downfall, above which the pair is likely to accelerate the up-move towards up-move could further get extended towards 1.1460 intermediate resistance en-route the key 1.1500 psychological mark, coinciding with 38.2% Fibonacci retracement level. On the flip side, any meaningful retracement now seems to find immediate support near the trend-channel resistance break-point, around the 1.1370 region. A follow-through weakness, leading to a subsequent break below the 1.1335 horizontal zone, will negate prospects for any further near-term up-move and turn the pair vulnerable to head back towards challenging the key 1.1300 support.

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