Recently, the euro has been consolidating around 1.0500 against the US dollar, with the market closely monitoring the upcoming release of US non farm payroll data and Eurozone economic indicators.

US economic data may support the US dollar

The recent low number of initial jobless claims in the United States (213000) indicates that the job market remains healthy. At the same time, the market expects the upcoming non farm payroll data to add 200000 people this Friday. If the data meets or exceeds expectations, it will further strengthen market confidence in the US economy and support the strength of the US dollar.

In addition, the average hourly wage data is also crucial. The market expects that if wage growth is strong, the Federal Reserve may continue to maintain high interest rates in 2024, which will be positive for the US dollar.

In September, the US trade deficit reached $84.4 billion, and the market expects the deficit to narrow to $75 billion in October. In the long run, the growth of US energy exports and the recovery of the manufacturing industry will provide some support for easing the deficit. Therefore, the impact of trade deficit data on the US dollar may be short-term, but the performance of employment data may still continue to support the US dollar.

Weak European fundamentals and political risks drag down the euro

The economic growth in the Eurozone remains sluggish. Germany's factory orders fell by 1.5% in October, although the decline was lower than expected, indicating that the industrial sector of the core economies of the eurozone still faces pressure. At the same time, the growth rate of the service industry has slowed down, and overall economic data has failed to boost market confidence in the recovery of the eurozone economy.

In addition, ECB President Lagarde reiterated her dependence on data in recent statements and warned that geopolitical risks and international trade threats may further undermine economic growth. This cautious stance has kept the market pessimistic about the policy outlook of the European Central Bank, and it is expected that there may be a further 25 basis points to 3% interest rate cut at the December meeting. The dovish expectations of monetary policy further suppressed the performance of the euro.

The political turmoil in France has exacerbated uncertainty in the eurozone. After the French government's vote of no confidence was successfully passed, the market has doubts about the continuity of the country's economic policies and its ability to manage fiscal deficits. If fiscal issues are not effectively controlled, it may affect the overall economic recovery of the eurozone.

Although these events have limited immediate impact on the euro, they have strengthened market concerns about the long-term trend of the euro and exacerbated its instability.

technical analysis

Foreign exchange analyst Sagar Dua believes that the EUR/USD is currently hovering around 1.0500, and in the short term, all short-term and long-term moving averages are showing a downward trend, indicating that the market is still under downward pressure. However, the RSI on the 14th showed that oversold conditions have eased, indicating that the short-term bearish momentum is weakening.

Key support: November 22nd low of 1.0330. If it falls below this level, the euro may test a lower level against the US dollar.

Key resistance: 1.0750 where the 50 day moving average is located. If this resistance can be overcome, it may alleviate the downward pressure in the short term.

Dua maintains an overall bearish view in terms of technology, unless there is a significant improvement in fundamental factors.

EUR/USD daily chart