EUR/USD rises on soft ADP jobs data, Fed Chairman Powell’s remarks

• EUR/USD climbs 0.42%, spurred by ADP data and Powell’s remarks.
• US ADP February’s report was solid at 140K, improved compared to January, but missed estimates.
• Fed’s Powell remarks in testimony at Capitol Hill hint at no immediate rate cuts.

The Euro extended its gains against the US Dollar early during the North American session, sponsored by softer-than-expected ADP jobs report in the United States (US). Thus, the EUR/USD edges up 0.42% and trades at 1.0881 after hitting a two-week high of 1.0887.

EUR/USD hits two-week peak, gains momentum ahead of the European Central Bank’s decision

In February, private companies hired fewer people than the 150K expected, with figures increasing by 140K. Nevertheless, compared to January’s 111K reading, the jobs market remains strong, as noted by Nela Richardson, chief economist of ADP. Richardson said “Job gains remain solid. Pay gains are trending lower but are still above inflation.”

Nevertheless, the data was overshadowed by prepared remarks that the US Federal Reserve (Fed) Chairman Jerome Powell will deliver at Capitol Hill. He said the Fed doesn’t expect it will be appropriate to reduce rates until they [Fed] have greater confidence in inflation moving sustainably towards 2%.

Powell said rates had peaked, acknowledged the progress on inflation, and added that the current restrictive stance puts downward pressure on economic activity and inflation. He said they would ease policy at some point in the year, though they would assess incoming data. He added that the risks to achieving the Fed’s dual goal are moving into better balance.

Following the data and Fed’s Powell remarks, the EUR/USD rose sharply. The US Dollar Index (DXY), which tracks the performance of six other currencies against the buck, tumbled more than 0.30% to 103.47. US Treasury bond yields are diving across the short and long ends of the curve.

In addition, traders brace for the European Central Bank's (ECB) monetary policy decision on Thursday, with analysts expecting no change to their monetary policy. However, traders would look for hints, about a possible rate cut towards the June meeting.

EUR/USD Price Analysis: Technical outlook

The pair has broken above a downslope resistance trendline drawn from January’s highs and the 50-day moving average (DMA) at around 1.0860/70, opening the door to challenge 1.0900. Once that level is cleared, the next resistance emerges at 1.0932, the January 24 swing high, followed by the January 11 high at 1.0999, shy of 1.10. On the other hand, if prices fail to stay above the 1.0860 area, look for a deeper pullback towards the confluence of the 100 and 200-DMAs at around 1.0831/34 before testing 1.0800.