The Euro is trying to stage a rally during the European trading session today but is facing resistance near the 1.06 level as traders await the release of the non-farm payrolls figure later today during the American session
Analysts are predicting the US economy created 391,000 jobs in April, down slightly from the 431,000-increase seen in March. With this result, the unemployment rate is expected to fall from 3.6% to 3.5%, matching the pre-pandemic low set in early 2020.
Any sign of cooling in the labor market could help bolster bets that the Federal Reserve will not be extremely aggressive in regard to tightening monetary policy in its efforts to tackle sky-high inflation.
This could lead to a pullback in U.S. Treasury yield and put pressure on the US dollar while at the same time giving the Euro ca significant boost. For the latter scenario to materialize, the rapid growth in U.S. average hourly earnings witnessed recently would have to come in below expectations which would show the jobs market is beginning to cool off.
Even if the Euro does manage to stage some type of rally today, it is not expected to last for long as the European Central Bank has no intensions of tightening monetary policy anytime soon.
At the moment, the European economy is so bearish, and of course, the market will continue to see a reason to short this currency going forward.
The US dollar also has the backing of the Jerome Powell who has more or less confirmed that a 50-basis point rate hike is coming at the next meeting, and maybe followed up with another 50-point basis hike shortly afterwards.
Anyway, you look at it, the EUR/USD currency pair is in a downtrend and its probably best for now to sit on the sidelines and not take any long positions in the Euro
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