EURUSD Pullback to 1.055 and Then Heading to 1.10!

3 พ.ย. 2023

The analysis of the EUR/USD performance indicates a consolidation of weekly gains above the 1.0600 level in the early hours of Friday in Europe. This consolidation is partly attributed to the recent weakness of the US dollar and US Treasury bond yields. The market is eagerly awaiting the US Nonfarm Payrolls (NFP) data for a fresh directional impetus. The rally of the EUR/USD pair encountered a barrier after reaching the 1.0667 level but still holds above the key support level of 1.0600 in the early Asian session on Friday. A decrease in US Treasury bond yields and the correction of the US dollar (USD) provide some support to the pair. The 10-year Treasury yield stands at 4.66%, the lowest level since October 13. On the Federal Reserve (Fed) front, markets anticipate that the interest rate hiking cycle is already over. Fed Chair Jerome Powell has emphasized the need for tight financial conditions to prevent further rate hikes. Powell added that the central bank would take action to bring inflation back to the 2% target, but policy decisions will remain highly data-dependent. According to the CME FedWatch Tool, the probability of a 25 basis-point (bps) rate increase in the December meeting remains low at around 20%, putting additional pressure on the US dollar. In the US economic context, weekly Initial Jobless Claims have increased to the highest level in seven weeks, rising to 217,000 from the previous reading of 212,000, exceeding the estimated 210,000. Meanwhile, Unit Labor Costs for the third quarter have decreased by 0.8% compared to a previous rise of 2.2%, falling short of expectations. On the Euro front, the final Eurozone Manufacturing PMI, as calculated by HCOB, dropped to 43.1 in October from September's 43.4, exceeding the initial estimate of 43.0. A reading below 50 indicates a contraction in activity. With Manufacturing PMIs in France, Italy, and Spain plummeting, and Germany already indicating a severe recession, it's evident that the sector will contract in each of these nations in the current quarter, which may limit the upside potential for the Euro and act as a headwind for the EUR/USD pair. Looking ahead, market participants will be monitoring the Eurozone Unemployment Rate and US employment data, including Nonfarm Payrolls and Average Hourly Earnings. Additionally, the US ISM Services PMI will be released later on Friday. These data could provide a clear direction for the EUR/USD pair. This analysis aims to highlight the strong bullish sentiment in the H4 timeframe, although I am personally waiting for a retracement around the 1.0560 level before considering long entries. We will see if the NFP report will bring the market down to gather liquidity before a new bullish momentum. Please comment and leave a like to support our work. Greetings and happy trading to all from Nicola, the CEO of Forex48 Trading Academy.