Daily Technical Analysis EUR/USD: Ahead of 1.0900 as Weak NFP Data Weighs on the Dollar

The EUR/USD extended its rally near the 1.0915 level at the start of the Asian session on Monday. The price rise is favored by the weakening of the dollar after poor employment data in the United States. Market traders will pay special attention to the German HCOB Purchasing Managers’ Index (PMI) along with the Eurozone PMI, in addition to the ISM Services PMI in the United States, which will be released later today and is expected to affect the EUR/USD pair, especially on the dollar side.

The slowdown in employment growth and the increase in the US unemployment rate heightened fears of a deeper economic slowdown and weighed on the dollar (USD) across the board. Nonfarm payrolls (NFP) increased by 114,000 in July, down from 179,000 in June and below forecasts of 185,000, according to data released Friday by the Labor Department. Additionally, the unemployment rate rose to 4.3%, its highest level since October 2021.

Despite some fears of a U.S. recession, Federal Reserve Chairman Jerome Powell indicated last week that the central bank’s confidence in the “solid” economy and easing inflation data is helping to provide further confidence that the U.S. central bank can cut interest rates very soon. Financial markets, for their part, have fully discounted a rate cut of less than 25 basis points for the three meetings remaining this year, according to CME’s FedWatch tool.

Across the ocean, high inflation and sustained growth in the Eurozone economy caused market expectations to increase for more interest rate cuts this year. The headline HICP rose to 2.6% y-o-y during July, above economists’ consensus of 2.4%. The underlying HICP, which does not take into account volatiles such as food, energy, alcohol, and tobacco, rose at a steady 2.9% compared to expectations of 2.8%.

EUR/USD daily technical analysis for August 5th:

For EUR/USD, the break of the 1.0800 support will continue to be the key point for the bears to move noticeably lower. The ISM Services PMI in the US may extend this downtrend. That said, nearby support levels will be 1.0720 and 1.0600. From the latter level, technical indicators may degrade to oversold levels. On the other hand, the psychological resistance at 1.1000 will remain the most important if the bulls want to regain trend control of the pair.