EUR/USD Daily Forecast: Euro at Overwhelming Support Confluence Ahead of NFP

What to Expect from the NFP Report Today

Analysts are expecting an improvement in the labor markets for June after a disappointing reading in the prior month. The headline increase is expected to reflect 162,000 new jobs from 75,000 in the prior month.

An article published by Bloomberg earlier today shows that most of the big banks do expect the jobs report to come in roughly in line with expectations. The article showed that most banks thought the unemployment rate would remain at 3.6% and that annual wage growth will print at 3.2%.

The Implications of Jobs Data on Monetary Policy

I expect that EUR/USD will be a bit more sensitive to today’s jobs report compared to the recent past. The reason being is that the markets still strongly believe that the Federal Reserve will cut 25 basis points. In fact, they are still pricing in a 30% chance of 25 basis points in cuts.

As labor strength is an important component of the Fed’s mandate, today’s report might just ultimately decide which direction the Fed will take in July. In this context, a strong report can push back expectations for easing and vice versa.

Technical Analysis

EUR/USD is at an important inflection point ahead of the jobs report as there is a significant downside support confluence. I have mentioned this area in prior reports as the pair has been consolidating above it for the last two days.

Specifically, there is a horizontal level in play at 1.1264. This level held the pair lower twice in May and offered a bit of resistance in early June. The 100-day moving average is within close proximity of the level to create a confluence.

Further adding support is the lower bounce of a rising trend channel that originates from lows posted in late May. Also, the 61.8% retracement measured from mid-June lows and the 50% retracement measured from late May lows all fall near 1.1264.

Considering the overwhelming confluence of downside support, I think the NFP report will need to be significantly better than expected for EUR/USD to break lower here.

Bottom Line

• There is a major support confluence in play at 1.1264
• The outcome of the NFP report stands to have a major impact on the near-term trend. More so than in prior reports.
• Upside resistance at 1.1305 held the pair lower earlier in the week. A bullish break provides an early signal for a trend reversal.