- According to recent trading, the euro appears increasingly ready to test some upside targets against the US dollar in the coming days, thanks to a strong reaction to the US jobs report on Friday.
- According to forex trading platforms, the EUR/USD exchange rate rose to a high of 1.0812 on Friday after US jobs data came in weaker than analysts had expected, prompting markets to bring forward the expected start date of the US rate cut cycle from December to September.
Consequently, this led to a decline in global bond yields and boosted investor sentiment, both of which tend to work against the broader US dollar while supporting the euro. Furthermore, if this broader backdrop remains in place this week, we will look for some steady gains in EUR/USD. Also, we note that much of the initial post-jobs report rally has faded in the hours since the report's release, suggesting that there is still some hesitation in the market, which will limit the pace of the euro's near-term advance. Ultimately, it will take more than just one soft jobs report to convince investors that the US economy is finally slowing down enough for rate cuts.
On the economic side, according to the results of the economic calendar, factory orders in Germany fell 0.4% month-on-month in March 2024, after a downwardly revised 0.8% decline in February, and worse than market expectations for a 0.4% rise. Excluding large-scale orders, new orders in March are 0.1% higher. In the manufacturing sector, orders for aircraft, ships and trains shrank by 2.3%, while orders for fabricated metal products also fell (-4.5%). In contrast, increases were observed in new orders for the automobile industry (1.1%) and electrical equipment manufacturing (5.9%). Also, new orders for capital and intermediate goods decreased by 0.4%, while orders for the consumer goods sector increased by 0.7%. Moreover, Domestic orders decreased by 3.6% while foreign orders jumped by 2%, with orders from the euro area increasing by 10.6% while orders from outside the euro area decreased by 2.9%. Eventually, the less volatile three months compared to the previous three months showed that new orders were 4.3% lower in January-March 2024 than in the previous three months.
EUR/USD Technical analysis and forecast:
The chart attached shows that Friday saw the EUR/USD break above the resistance formed at the 23.6% Fibonacci retracement of the 2024 low (second from the lower horizontal line). Moreover, the exchange rate rose to the 38.2% line where it also meets the 200-day moving average, indicating a good layer of resistance. Thus, further progress could lead to another test of this level (around 1.08) in this week’s trading. The weakness is likely to be supported by the 23.6% Fibonacci line, which turns from resistance to support.
Meanwhile, this will be a busy week from the standpoint of the Fed's interest rate outlook, which is of course the main driver of the euro against the dollar. On this front, we have a group of Federal Reserve spokesmen lining up to give their views on the latest data and what they think it means for the policy outlook. This can provide some volatility and provide some disruption. Ultimately, the most important macro releases will not be released until mid-month, the most notable of which is inflation.
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