EURUSD on the Rise: Nonfarm Payrolls and Fed Rate Decisions in Focus

The EURUSD pair has been trending upwards since late June, supported by key technical indicators and identifiable support and resistance levels that provide potential targets for traders. However, the upcoming release of the payroll report may affect the Federal Reserve’s decision on interest rate cuts, depending on the strength of the job growth data.

High Impact Economic Events

Friday 15:30 (GMT+3) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+3) – USA: Nonfarm Payrolls (USD)
Friday 17:00 (GMT+3): Canada: Ivey PMI (CAD)

The EURUSD pair has been trending upward since June 26, when it rebounded from 1.06651. Since then, the exchange rate between the Australian and US Dollar has consistently shown higher peaks and higher troughs, indicating a healthy uptrend. Despite a recent downward correction where prices found support at the 20-period Exponential Moving Average (EMA), the EURUSD’s upward trend remains intact. Specifically, the 20-period EMA is above the 50-period EMA, and prices are trading above both EMAs. Additionally, the Momentum oscillator and the Relative Strength Index are recording values above the 100 and 50 baselines.

Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:

1.12000 The initial price target is seen at 1.12000, representing the high point marked on August 26.
1.13078: The second price target is identified at 1.13078, corresponding to the 161.8% Fibonacci Extension drawn from the swing high of 1.12000 to the swing low of 1.10251.
1.14302: The third target is established at 1.14302, aligning with the 423.6% Fibonacci Extension drawn from the swing high of 1.10073 to the swing low of 1.08803.
1.14825: An additional price target is determined at 1.14825, corresponding to the 261.8% Fibonacci Extension drawn from the swing high of 1.12000 to the swing low of 1.10251.

Should the sellers take market control, traders may consider the four potential support levels listed below:

1.10251: The first line of support is established at 1.10251, reflecting the swing low marked on September 3.
1.09384: The second support level is 1.09384, representing the weekly support (S2) calculated using the standard Pivot Points method.
1.07764: The third support line is identified at 1.07764, aligning with the swing low established on August 1.
1.06651: An additional downward target is observed at 1.06651, corresponding to the low point formed on June 26.

The US dollar weakened against most major currencies on Thursday as investors anticipated Friday’s US payrolls report, which could influence the Federal Reserve’s decision on interest rate cuts. Recent signs of slowing US economic growth have increased the likelihood of rate cuts, as Fed Chair Jerome Powell signaled concerns about a softening labor market. Despite a decline in jobless claims, fears of an economic downturn persist. The market is divided between expectations of a 25 or 50 basis point rate cut at the Fed’s upcoming meeting.
If the Nonfarm Payroll report shows strong job growth, it would likely decrease the likelihood of the Federal Reserve implementing a 50 basis point rate cut. Robust employment figures suggest a thriving economy, which could add to inflationary pressures. Conversely, if the payroll data is weak, the chances of a larger 50 basis point rate cut rise. Poor job numbers signal an economic downturn, prompting the Fed to reduce rates to stimulate growth. The Fed’s decision hinges on striking a balance between managing inflation and supporting the economy.

In conclusion, while the EURUSD pair has been following an upward trend with clear support and resistance levels, the upcoming US payroll report will play a critical role in shaping the Federal Reserve’s interest rate decisions. Strong job growth could reduce the likelihood of significant rate cuts, while weak data may prompt more aggressive monetary easing. Traders should remain attentive to these key economic events, as they will likely influence both market direction and central bank policy in the coming weeks.