EUR/USD extends bounce against wavering Greenback

• EUR/USD rose on Thursday, climbing back over 1.1100.
• Gains remain limited after miss in EU Retail Sales.
• US NFP print due on Friday takes the center stage for the week.

EUR/USD stepped into a second straight day of gains on Thursday, recapturing the 1.1100 handle as markets broadly sell off the Greenback in advance of Friday’s hotly-anticipated US Nonfarm Payrolls (NFP) jobs report. Markets are looking for further signs that the Federal Reserve (Fed) is on pace to deliver an initial rate trim and kick off a rate cutting cycle in September, but US data will need to continue softening to keep rate cut hopes on the high side.

European economic data did little to provide additional support for the Fiber after July’s EU Retail Sales missed the mark. YoY Retail Sales came in worse than expected, printing at -0.1% for the year ended in July and missing the expected rebound to 0.1% compared to the revised last -0.4% contraction.

According to payroll processor ADP, the US added 99K net new jobs in August, down from July’s revised 111K and well below the expected 145K. August’s ADP additions are the lowest print since early 2021, sparking a fresh round of risk aversion and reigniting investor concerns that the US could be heading into a recession.

The ADP jobs report serves as a bellwether for what markets can expect from Friday’s upcoming US NFP report, albeit one with a wobbly track record for accuracy. August’s NFP print represents the last significant labor update before the Federal Reserve’s (Fed) upcoming rate call on September 18, when Fed policymakers are broadly expected to kick off a rate-cutting cycle.  Friday’s NFP print is slated to come in at 160K compared to the previous month’s 114K. 

According to the CME, rate markets are currently betting on 40% odds that the Fed will blow the doors open with a 50 bps cut later in the month. The remaining 60% are betting on a more demure 25 bps opening rate trim. Investors are anticipating using this Friday’s NFP print as a way to gauge the depth of the Fed’s first rate cut since the Fed slashed 100 bps in March of 2020.

EUR/USD price forecast

Bidders continue to come out of the woodwork to keep bids on balance even if they can’t quite pull out a bullish recovery. EUR/USD popped into a 13-month high just above 1.1200 early last week, and a near-term pullback in Greenback flows sees bids scrambling to hold onto bullish chart paper.

The pair still trades well north of the 200-day Exponential Moving Average (EMA) at 1.0845. Despite holding deep in the bull country, EUR/USD still faces a steepening bearish pullback as shorts congregate targets just above the 50-day EMA at 1.0956.

EUR/USD daily chart