The EUR/USD exchange rate held steady, reaching its highest point since June 22nd after the US published a weak non-farm payrolls (NFP) and manufacturing PMI report. It rose to 1.1437 ahead of key macro data later this week.
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Odds of Federal Reserve Hikes Fade
The EUR/USD pair rose as traders readjusted their views of the next Federal Reserve interest rate hikes. A Polymarket report shows that the odds of a cut have dropped to 48% from the year-to-date high of 66%.
These odds retreated after the US published the latest non-farm payrolls (NFP) data. This report showed that the economy created just 57k jobs in June, well below the expected 114k. The Bureau of Labor Statistics (BLS) also downgraded the May NFP report from 172k to 129k.
These numbers indicate that the labor market is not as strong as analysts expected. More data released by the ISM showed that the manufacturing PMI retreated for the third consecutive month.
Therefore, there is a likelihood that the Federal Reserve will keep interest rates steady this year instead of hiking. Besides, there are signs that US fuel prices are falling, with the average gasoline price falling to $3.81 from $4.2 a month ago.
Looking ahead, the EUR/USD pair will react to several macro events this week. Europe will publish its Producer Price Index (PPI) report on Monday, a few days after its Consumer Price Index (CPI) showed that prices retreated in June. It will also release the latest retail sales data.
The European Central Bank (ECB) will publish the minutes of the last meeting, while Christine Lagarde will share her thoughts on the state of the economy and the outlook of the ECB. There will be no major macro data from the US, but the Federal Reserve will publish minutes of the last meeting.
EUR/USD Technical Analysis
The weekly chart shows that the EUR/USD pair has come under pressure in the past few months. It has slumped from the year-to-date high of 1.2076 in January to 1.1437 today.
The pair has dropped below the 50-week moving average and the 23.6% Fibonacci Retracement level. Most importantly, the pair has formed a head-and-shoulders pattern, a common bearish reversal sign in technical analysis. It is now hovering near this pattern’s neckline.
Therefore, the pair will likely resume the downward trend as sellers target the psychological level of 1.1300. A move above the 23.6% retracement level of 1.1630 will invalidate the bearish outlook.
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