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MENAFN- Daily Forex)
- At the end of last week, the US dollar strengthened against other major currencies as the likelihood of a 50-basis point interest rate cut in November diminished.
- As a result, the EUR/USD pair came under selling pressure, pushing it towards the 1.0952 support level, its lowest in six weeks.
- It is currently trading around 1.0970 at the time of writing this analysis.
On the stock trading platforms front, US futures contracts are stable at the beginning of the week.
US stock futures contracts witnessed little change on Monday as investors search for new market catalysts in the new week. Last week, the major averages witnessed some volatility before achieving modest gains, as the Dow Jones index rose by 0.09%, the S&P 500 index added 0.22% and the Nasdaq Composite index rose by 0.1%. The moves came as Wall Street markets rose on Friday after a stronger-than-expected US jobs report boosted hopes that the Federal Reserve would achieve a soft landing. However, caution surrounding the upcoming US presidential election and rising tensions in the Middle East kept investors on edge.
Now, markets are looking ahead to the latest minutes of the Federal Reserve's meeting on Wednesday and the Consumer Price Index report on Thursday to guide interest rate expectations. On the corporate front, earnings are set to come in this week from PepsiCo, Delta, BlackRock, JPMorgan Chase and Wells Fargo, among others.
According to the economic calendar, the US economy reportedly added a total of 254,000 nonfarm jobs in September, beating expectations of a reading of 147,000. The report from the US Bureau of Labor Statistics was strong across the board, with the August report seeing a significant improvement from 142,000 jobs to 159,000. Also, the country's unemployment rate fell from 4.2% to 4.1%.Question: Is this a sign that the US economy needs another burst of stimulus?
Markets have their doubts, as the Bureau of Labor Statistics' expectations measure shows that investors now see only a 5% chance of a 50-basis point cut in November. Overall, easing expectations of cuts, in turn, boosts US Treasury yields and the US dollar.
The Federal Reserve cut US interest rates in September on the grounds that the US Labor market was slowing, and inflation was on track to fall to 2.0%. Analysts say the decision was still right because the Fed could not risk letting the Labor market slide too far. The Labor market now appears to have turned for the better. Longview Economics says today's strong payrolls report, with upward revisions, marks a“small upside” in nonfarm payrolls in recent months.
Also reported, average hourly earnings rose 0.4% month-on-month in September, down from 0.5%, and were up 4% year-on-year. Ultimately, Economists say that strong wage trends can boost inflation as they support demand in the economy.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money EUR/USD Technical analysis and forecast:
According to the performance on the daily chart below, the EUR/USD is on a downward correction path. As mentioned before, a break below the 1.1000 level will be important for a strong move by the bears and the general trend will change to bearish if the bears move strongly towards the support levels of 1.0945 and 1.0880 respectively. Moreover, we expect the EUR/USD price to remain on its current downward path until the reaction to the announcement of the US inflation readings this week. On the other hand, and in the same time frame, the return of the bulls in the currency pair towards the resistance of 1.1140 will be important for the upward trend again.
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