EUR/USD pares the decline from earlier this week as mixed data prints coming out of the U.S. economy drag on the dollar, and the exchange rate may stage a larger rebound ahead of the Non-Farm Payrolls (NFP) report amid the failed attempt to test the 2019-low (1.1176).
Updates to the ISM Non-Manufacturing survey showed the index narrowing to 56.1 from 59.7 in February to mark the lowest reading since August 2017, and the renewed weakness in business sentiment may become a growing concern for the Federal Reserve as the Trump Administration struggles to reach a trade deal with China.
In response, the Federal Open Market Committee (FOMC) may continue to alter the forward-guidance for monetary policy as the central bank plans to wind down the $50B/month in quantitative tightening (QT) by the end of September, and a growing number of Fed officials may show a greater willingness to insulate the U.S. economy as ‘data arriving since September suggest that growth is slowing somewhat more than expected.’
As a result, Fed Fund Futures still reflect a greater than 50% chance for a rate-hike in December, but it remains to be seen if the central bank will abandon the hiking-cycle as Chairman Jerome Powell & Co. forecast a longer-run interest rate of 2.50% to 2.75%.
With that said, the U.S. dollar may face a more bearish fate over the near-term as the FOMC responds to the weakening outlook for growth, with EUR/USD at risk of staging a larger rebound ahead of the Non-Farm Payrolls (NFP) report in light of the failed attempt to test the 2019-low (1.1176). Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.
EUR/USD Rate Daily Chart
The broader outlook for EUR/USD remains clouded with mixed signals as both price and the Relative Strength Index (RSI) snap bearish formations from earlier this year after trading to a fresh yearly-low (1.1176).
Nevertheless, the failed attempt to test the 2019-low (1.1176) along with the lack of momentum to close below the Fibonacci overlap around 1.1190 (38.2% retracement) to 1.1220 (78.6% retracement) may spur a near-term rebound in EUR/USD as the exchange rate initiates a fresh series of higher highs & lows.
In turn, a break/close back above the 1.1270 (50% expansion) to 1.1290 (61.8% expansion) region raises the risk for a move towards 1.1340 (38.2% expansion), with the next area of interest coming in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion).
For more in-depth analysis, check out the 2Q 2019 Forecast for the Euro
Additional Trading Resources
Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.
Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.
--- Written by David Song, Currency Analyst
Follow me on Twitter at @DavidJSong.
