EUR/USD holds gains above 1.0900 as the US Dollar (USD) edges lower on firm Fed rate-cut prospects. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near 103.00 after correcting from a four-day high of 103.50.
The expectations for Fed rate cuts rose significantly this week after the weak United States (US) Nonfarm Payrolls (NFP) report for July published last Friday, which prompted fears that the economy is entering a recession. This bolstered risk aversion, which caused global equity markets to face an intense sell-off on Monday.
Meanwhile, fears of a weakening US labor market have been diminished by lower-than-expected Initial Jobless Claims for the week ending August 2. The data showed on Thursday that the number of individuals claiming jobless benefits for the first time came in lower at 233K than estimates of 240K and the prior release of 250K (upwardly revised from 249K).
Commenting on the latest jobless claims print, Gennadiy Goldberg, head of US rates strategy at TD Securities in New York, said: “This is a very positive print for markets overall. It reinforces the fact that labor market momentum is not slowing to the same extent that was represented by the payroll report, and it also reinforces the absence of very significant layoffs in the economy.”
According to the CME FedWatch tool, investors are divided over the size of Fed rate cuts in September. 30-day Federal Funds futures pricing data shows that traders see a 54.5% chance that interest rates will be reduced by 50 bps in September, down from 74% recorded a week ago.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
EUR | 0.02% | -0.01% | 0.00% | 0.07% | 0.23% | -0.04% | -0.22% | |
USD | -0.02% | -0.05% | -0.07% | 0.05% | 0.21% | -0.05% | -0.25% | |
GBP | 0.01% | 0.05% | 0.02% | 0.07% | 0.25% | -0.03% | -0.19% | |
JPY | 0.00% | 0.07% | -0.02% | 0.06% | 0.26% | -0.03% | -0.18% | |
CAD | -0.07% | -0.05% | -0.07% | -0.06% | 0.16% | -0.09% | -0.27% | |
AUD | -0.23% | -0.21% | -0.25% | -0.26% | -0.16% | -0.27% | -0.44% | |
NZD | 0.04% | 0.05% | 0.03% | 0.03% | 0.09% | 0.27% | -0.17% | |
CHF | 0.22% | 0.25% | 0.19% | 0.18% | 0.27% | 0.44% | 0.17% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
EUR/USD trades near the upper boundary of a Channel formation on a daily timeframe. A breakout of the aforementioned chart pattern results in wider ticks on the upside and heavy volume. The 200-day Exponential Moving Average (EMA), near 1.0800, acted as major support for the Euro bulls.
The 14-day Relative Strength Index (RSI) indicator returns inside the 40.00-60.00 range. If the RSI rises above 60.00, bullish momentum will be triggered.
More upside would appear if the major currency pair breaks above Monday’s high of 1.1009. This would drive EUR/USD towards the August 10, 2023, high at 1.1065, followed by the round-level resistance at 1.1100.
In an alternate scenario, a downside move below the August 1 low at 1.0777 would drag the pair toward the February low near 1.0700. A breakdown below the latter would expose the asset to the June 14 low at 1.0667.
The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.
Read more.Last release: Thu Aug 08, 2024 12:30
Frequency: Weekly
Actual: 233K
Consensus: 240K
Previous: 249K
Source: US Department of Labor
Every Thursday, the US Department of Labor publishes the number of previous week’s initial claims for unemployment benefits in the US. Since this reading could be highly volatile, investors may pay closer attention to the four-week average. A downtrend is seen as a sign of an improving labour market and could have a positive impact on the USD’s performance against its rivals and vice versa.
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