The EUR/USD exchange rate has been in a strong bull run this year, and is hovering at its highest level since September 2021. It has jumped by over 15% from the lowest level this year, making it the euro’s best start of the year in years.
US nonfarm payrolls data
The EUR/USD pair’s bullish momentum stalled after the US published strong jobs numbers on Thursday. According to a report, the Bureau of Labor Statistics (BLS) stated that the economy added over 147,000 jobs in June, significantly exceeding the expected 100,000.
The jobs report was also higher than the 144k that Wall Street analysts were expecting. Notably, the unemployment rate declined to 4.1% from 4.2% in May, better than the expected 4.3%.
These numbers were a surprise because analysts have been expecting the labor market to cool after Donald Trump launched tariffs against most countries.
They were also a surprise because the ADP had sent a shockwave a day earlier after its report showed that the economy lost over 33,000 jobs during the month. It also came after Microsoft announced that it was firing 9,000 workers mostly in its gaming division.
Still, analysts warned about the composition of the nonfarm payrolls report. 73,000 of the 147,000 jobs created during the month came from the government, mostly state and local. Also, most of the remaining jobs were in the healthcare and social assistance industries.
The strong nonfarm payrolls numbers indicate that the Federal Reserve will not be under pressure to cut interest rates at the next meeting, as some analysts had predicted. Instead, the earliest that the bank will cut is in its September meeting.
By that meeting, it will have received two consumer inflation reports, which will provide more information about the impact of tariffs on the US economy. Odds of a September cut have jumped to over 80%.
FOMC minutes ahead
The EUR/USD exchange rate will be muted on Friday as the US markets will be closed for holiday.
Still, the pair will have some top catalysts that may impact its price action. The most notable one is the upcoming deadline for Donald Trump’s tariffs on July 7. Trump has committed to continue with his tariffs when the deadline ends.
In a recent statement, he said that the administration would send letters to countries telling them about their tariffs. This, in turn, could restart the trade war, especially with the European Union.
The other key catalyst for the EUR/USD exchange rate will be the upcoming Federal Reserve minutes. These minutes will provide more color on the last meeting and what officials deliberated.
Still, these minutes will have a minimal impact on the pair due to the non-farm payrolls report. Also, Jerome Powell recently made a statement in which he said that the Fed would maintain its data dependence when making the next rate decision.
EUR/USD technical analysis
The weekly chart shows that the EUR/USD exchange rate has been in a strong bull run in the past few months. It recently crossed the important resistance level at 1.1572, the highest swing on April 21. That move invalidated the bearish double-top pattern.
The pair has moved above the 50-week and 100-week moving averages, a sign that bulls are in control. The Average Directional Index (ADX) has jumped to 34, its highest level since November 2022.
Therefore, while the bullish momentum will continue, there is a risk that the pair will pull back and retest the support at 1.1572 before resuming the bull run. The bullish view will be invalidated if the pair drops below that support level.
The post EUR/USD forecast: signal ahead of the FOMC minutes appeared first on Invezz