EUR/USD pivots into a loss-making week after US NFP bolsters Greenback

• EUR/USD tumbled into 1.0800 once again, trimming the week’s earlier gains.
• US NFP figures came in much higher than expected.
• ECB rate cut unlikely to be chased by a follow-up rate trim.

EUR/USD tumbled sharply on Friday, receding after US Nonfarm Payrolls climbed well above forecasts and European Central Bank (ECB) President Lagarde warned that a follow-up rate cut to June’s quarter-point rate trim may not be on the cards as many investors hope.

US Nonfarm Payrolls added 272K net new jobs in May, well above the 185K forecast while th previous month saw only a slight downside revision to 165K from the initial print of 175K. US Average Hourly Earnings also outpaced expectations as wages grew at a firmer pace than investors had anticipated, growing at a MoM rate of 0.4% versus the forecast uptick to 0.3% from 0.2%.

The US Unemployment Rate ticked higher to 4.0%, but a still-tight US labor market and rising wages threw a large wrench into broad-market rate cut hopes to wrap up the trading week. According to the CME’s FedWatch Tool, rate traders are pricing in 51% odds of no rate cut at all in September, down steeply from 70% odds of at least a quarter-point trim on September 8 that was priced in prior to Friday’s NFP print.

ECB's Lagarde: Still a long way to go on defeating inflation

Despite the ECB delivering a much-sought after rate cut this week, ECB President Christine Lagarde tamped down expectations for a follow-up rate cut in July, noting that progress on inflation has been a choppy affair, and the ECB will need to see firmer progress on disinflation before committing to further rate cuts. A hawkish, or rather, not-dovish showing from the head of the ECB hobbled Euro bulls hoping for a late-session rebound to wrap up the trading week.

EUR/USD technical outlook

Friday’s steep tumble has forced the Fiber back into familiar technical congestion, knocking the pair down nearly a full percent peak-to-trough on the day. The pair has fallen from 1.0900 to the 1.0800 handle, with the pair backsliding into the 200-day Exponential Moving Average (EMA). 

Bidders will be looking for a technical rebound off of key technical levels next week, but a near-term collapse into a declining trendline setup might see bids slip further towards 1.0750 before buyers can hit the brakes and take another run at the topside.

EUR/USD hourly chart

EUR/USD daily chart