EURUSD portrays pre-NFP consolidation under 0.9800, ECB’s Lagarde eyed too

• EURUSD picks up bids to bounce off the lowest level in three weeks.
• Light macros, mixed sentiment also contribute to the typical pre-NFP trading lull.
• Firmer yields, hawkish Fed keeps EURUSD buyers hopeful but ECB’s Lagarde may help trigger intermediate rebound.
• US October jobs report could add strength to the corrective bounce on matching downbeat forecasts.

EURUSD licks its wounds around a three-week low as it approaches the intraday high near 0.9770. The major currency pair’s latest rebound could be considered preparations for the key data/events as traders await the US employment report for October and comments from European Central Bank (ECB) President Christine Lagarde on Friday.

The quote refreshed a multi-day low while declining for the fourth consecutive day on Thursday as the US dollar cheered a broad rush to risk safety amid fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB). Also contributing to the greenback’s strength were the fears emanating from China, North Korea and Russia, as well as the strong yields.

It should be noted that the hawkish comments from the ECB policymakers and mixed US data failed to tame the bearish bias the previous day.

On Thursday, European Central Bank (ECB) President Christine Lagarde said, “A recession won't be sufficient to settle inflation.” The policymaker also stated that they have to be attentive to spill-overs from the Fed policy. Further, ECB executive board member Fabio Panetta said, “If these bigger-than-expected increases are interpreted as signaling a higher terminal rate, we could have a stronger impact on financing conditions.” On the same line, ECB policymaker and Germany’s central bank head Joachim Nagel said on Thursday, the central bank “should not refrain from further hike rates, we have to bring inflation down in the mid-term.” In the end, ECB policymaker Mario Centeno said on Thursday, the central bank has “already made a large part of the necessary rate hikes to contain inflation in the Eurozone.”

Elsewhere, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

Against this backdrop, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures print mild losses while the yields are sidelined at the latest, which in turn portrays the market’s indecision.

While the EURUSD traders are paring the biggest weekly loss in seven, the US jobs report for October will be crucial for near-term directions. Forecasts suggest that the headline US Nonfarm Payrolls (NFP) could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior.

Although the downbeat expectations concerning the US jobs report teasing EURUSD buyers, pessimistic comments from ECB’s Lagarde will be enough to keep the bears on the table.

Technical analysis

A clear downside break of an upward-sloping support line from late September, now resistance around 0.9775, keeps EURUSD bears hopeful to test the six-week-old horizontal support surrounding 0.9680. Also increasing the strength of the bearish bias are the downbeat MACD signals and the RSI (14) conditions.