Euro Dollar Forecast: EUR/USD Turns Cautious as Traders Eye NFP’s
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EUR/USD Talking Points:
- Euro Dollar trades flat as markets digest Fed Powell’s commentary.
- US NFP’s pose an additional threat for EUR/USD if the labor market remains tight.
- Interest rate expectations remain the primary catalyst for price action.
EUR/USD has found brief reprieve after Tuesday’s decline that drove the major currency pair back below 1.060. As market participants digest commentary from Fed Chair Powell’s testimony, price action has moved into a tight range, forming around 1.056.
EUR/USD Daily Chart
Chart prepared by Tammy Da Costa using TradingView
After the semiannual monetary policy report raised the probability of a more aggressive rate hike at the March FOMC meeting, the USD gained, driving EUR/USD lower.
However, at the end of the two-day meeting, the repricing of the hawkish commentary and the lack of a fundamental catalyst helped ease the bearish momentum.
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While key psychological levels continue to provide support and resistance for the pair, a quiet economic calendar has left prices stagnant.
That being said, tomorrow brings German inflation and US NFP’s into the spotlight, providing an additional catalyst for volatility.
DailyFX Economic Calendar
As inflation remains a key concern for central banks, February’s US job data could drive prices in either direction.
For the US central bank, a strong job report will likely increase the likelihood of a 50-basis point rate hike, supporting a stronger Dollar. This could drive EUR/USD lower, opening the door for a probable retest of 1.050.
In contrast, a weaker employment report could reignite the possibility for a 25-basis point rate hike, allowing the Euro to recover toward the 1.060 mark.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.