The EUR/USD exchange rate wavered today, September 4, as investors reflected on the ongoing political crisis in France and the upcoming US non-farm payrolls (NFP) data. It was trading at 1.1655 on Thursday morning, up from last month’s low of 1.1390.
US labor market has softened
The EUR/USD exchange rate remained on edge on Thursday as focus among investors remained on the labor market.
A report by the Bureau of Labor Statistics released on Wednesday showed that the number of job vacancies retreated to the lowest level in months, a sign that the labor market was softening. The US had 3.2 million job vacancies in July, the lowest number in years.
Most market participants believe that the upcoming non-farm payrolls data will send a signal that the labor market was still under pressure in August, as tariffs on imports pushed more companies to have a cautious outlook on their job additions.
Donald Trump has confirmed tariffs on most countries this year. For example, goods from India are now being charged a 50% tariff, with a 25% for doing business with China. Chinese goods are being charged a 30% tariff, while a recent deal with the European Union settled on a 15% levy.
US non-farm payrolls data ahead
The most recent results showed that the economy added 73,000 jobs in Jul, with the unemployment rate rising to 4.3% during the month. Analysts don’t see a major improvement, with the average estimate being that the economy added 75,000 jobs in August as the unemployment rate to 4.3%.
Economists expect the data to show that the average hourly earnings softened to 3.7% in August from 3.9% in the previous month. Another set of weak jobs numbers will boost the view that the Federal Reserve will start cutting interest rates. In a statement, Christopher Waller, a Fed governor said:
“When the labor market turns bad, it turns bad fast. … So for me, I think we need to start cutting rates at the next meeting. I would say over the next three or six months, we could see multiple cuts coming in. Whether it’s like every other meeting, every meeting, we’ll have to wait and see what the data says.”
The EUR/USD exchange rate is also reacting to the ongoing political crisis in France, where the president is facing a vote of no confidence, putting the country at risk. In a statement, Prime Minister Francois Bayrou said that the recent talks between parties about saving his job were not likely to succeed.
EUR/USD technical analysis
The EUR/USD exchange rate remained in a tight range on Thursday morning as traders waited for the upcoming non-farm payrolls data. It has moved slightly above the 50-day Exponential Moving Average (EMA).
Most importantly, the pair has formed an inverse head and shoulders pattern whose neckline is the slanted trendline.
A H&S pattern is one of the most common bullish reversal patterns in technical analysis.
Therefore, the most likely scenario is where the price stages a strong breakout as investors focus on the year-to-date high of 1.1830, the highest swing in June this year.
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