EUR USD remains pressured in the wake of US jobs data

As has been widely reported, Friday’s US non-farm payrolls data showed that 271,000 jobs were added in October, far surpassing prior expectations of 181,000 jobs.

Because of the potential implications of this data on the Fed’s decision to raise interest rates for the first time in nearly a decade, the US dollar and the price of gold both moved dramatically after the report. With the markets now largely expecting a US rate hike in December, the dollar experienced a sharp surge while gold plunged.

In the wake of this data release, Monday saw the US dollar pull back modestly, paring some of Friday’s gains. With the Fed’s meeting in mid-December being seen as a potentially pivotal event for most financial markets, however, the run-up to that event should continue to see advances for the US dollar, or at least strong support in light of increased rate hike expectations.

For the EUR/USD currency pair, the hawkish-leaning Fed can be seen in stark contrast to a rather dovish European Central Bank (ECB), which could likely institute further stimulus measures as early as December. This divergence in monetary policy between the ECB and the Fed should continue to place substantial pressure on EUR/USD.

The past three weeks have seen a sharp plunge for the currency pair that has broken down below a confluence of several previous support factors, including the key 1.1100 prior support level, the 200-day moving average, and a major uptrend line extending back to March’s 12-year low. After these breakdowns, EUR/USD continued to be weighed down below 1.1100. This slide culminated after Friday’s noted US jobs data release, when the currency pair hit and dipped below its longstanding downside target at 1.0800.

Despite having pared some of those losses on Monday, EUR/USD remains pressured from a longer-term perspective, especially if it manages to continue trading below the 1.0800 level, which has tentatively transformed into resistance after its prior support was broken down on Friday. In the run-up to December’s Fed meeting, further Fed-driven dollar-support and the likelihood of more stimulus measures from the ECB could place EUR/USD on a relatively fast track to 1.0500 support, near March’s long-term lows. Any further downside momentum below 1.0500 could move the currency pair towards its long-term target at parity (1.0000).