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EUR/USD Sliding Into Support as the US Jobs Report (NFP) Looms Large

EUR/USD Sliding Into Support as the US Jobs Report (NFP) Looms Large

Nick Cawley, Senior Strategist

EUR/USD Price, Chart, and Analysis

  • German factory orders plunge to a multi-month low.
  • EUR/USD is back below 0.9800 as the latest US Jobs Report nears.
  • Retail traders increase their EURUSD long positions.
  • Monthly US Jobs Report (NFP) at 12.30 GMT.

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German factory orders fell further in September, missing expectations by a wide margin. According to data from the German Federal Statistical Office, foreign orders fell by 7% while domestic orders nudged 0.5% higher. New orders from the Euro Area decreased by 8% and those from other countries fell by 6.3%.

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Today’s final German Services PMI showed that the sector remained in contraction in October, suggesting that a contraction in German Q4 GDP is highly likely. According to Phil Smith, associate director at data provider S&P Global Market Intelligence, ‘A contraction of the German economy in the fourth quarter looks inevitable, with October PMI data signalling sustained declines in activity across both the manufacturing and services sectors amid broad-based strain on demand. A toxic mix of high inflation, soaring energy bills, rising interest rates and heightened levels of uncertainty has seen households and businesses rein in their spending.’ Mr. Smith did note that ‘On a more positive note, the rate of decline in services activity did at least ease somewhat and firms' expectations were less pessimistic than in September, following the initial shock of the Nord Stream 1 pipeline closure.’

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The latest US Jobs Report (NFP) is released at 12:30 GMT today and will give an updated look at the health of the US labor market. The Fed is keeping a close eye on the jobs market for any sign of weakness. The central bank continues to hike interest rates and cites the strength of the jobs market and rising wages as one of the main drivers behind the current lofty level of inflation. Any sustained weakness in the US labor market will re-fuel thoughts of a slowdown in the current rate hiking cycle by the US central bank.

For all market-moving economic releases and events, see the DailyFX Calendar

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The Euro remains under pressure against a strong US dollar and continues to leak lower. The downtrend is driven by an unbroken series of lower highs and lower lows, while recent price action has pushed the pair below all three moving averages. In addition, a clear bear flag is visible with EUR/USD testing the lower limit. In all, unless the US NFP report shows any signs of weakness, EUR/USD will continue to move lower.

How to Trade a Bearish Flag Pattern

EUR/USD Daily Price Chart November 4, 2022

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Chart via TradingView

Retail Traders Looking Bullish on EURUSD

Retail trader data show 64.99% of traders are net-long with the ratio of traders long to short at 1.86 to 1.The number of traders net-long is 1.58% higher than yesterday and 24.90% higher from last week, while the number of traders net-short is 3.97% lower than yesterday and 25.28% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias.

EUR/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% 6% 1%
Weekly 12% 3% 7%
What does it mean for price action?
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What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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