The EUR/USD pair is correcting on Wednesday, trading at approximately 1.1780, after briefly climbing to a multi-year high of 1.1830 earlier in the week. The US Dollar is in the process of a modest recovery after the US job openings report was solid, and there was a moderate hawkish Fed policy signal, and Fed Chair Jerome Powell was leaning bearish, offering caution as a speaker at the ECB Forum in Sintra.
Data-Driven Bounce for the Dollar
The US JOLTS report had 7.769 million job openings in June, well above forecasts of 7.3 million. The ISM Manufacturing PMI also increased to 49.0 from 48.5 in May, with the Production sub-index returning to expansion territory at 50.3 for the first time in months.
Overall, strong numbers only serve to further legitimize Powell’s decision to take a “wait and see” approach on rate cuts in the face of the political pressure. Trump has continued to push for lower interest rates, while now facing a lambasting by the press for his proposed tax bill that could potentially add $3.3 trillion to the deficit.
Eurozone Data Holds Ground, But Momentum Slows
German unemployment rose by 11K, and Eurozone CPI remained at 2% YoY, confirming stable inflation levels close to ECB targets. The manufacturing PMI increased to 49.5, but the data confirms that industrial activity seems more stable.
EUR/USD has been struggling to gain momentum above 1.1800, and this allowed for some mild profit-taking ahead of the labour reports in the US.
ADP Employment and NFP Data
Investors are now turning to the ADP Employment Change data due later today, expected to show a 95K gain for June. However, the main event remains Thursday’s Nonfarm Payrolls (NFP) report, which could determine the Fed’s next move on interest rates.
Meanwhile, ECB President Christine Lagarde is set to speak again at the central banking summit in Sintra, though markets don’t anticipate any new policy signals.
EUR/USD Technical Outlook
Currently, the EUR/USD pair is confronting what appears to be major resistance looking to hold at 1.1810, with the seller poised to jump in again slightly above at 1.1830 which was the recent swing high. Should the bulls move above the area around these levels, the next target could be 1.1850 which coincides with the 261.8% Fibonacci extension from the late-June rally.
On the downside, a Head & Shoulders pattern on the 1-hour chart shows the emergence of a growing bearish momentum. Price action is sitting around the neckline of the pattern at 1.1760 if the pair breaks below. Downside levels to monitor are 1.1690 (pattern target), 1.1680 (June 27 low), and 1.1650 (June 26 low). The 14-period RSI has also shifted into negative territory, indicating the loss of bullish momentum.
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