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5 Jan 2024

EUR/USD trades with modest gains above mid-1.0900s ahead of Eurozone CPI, US NFP

  • EUR/USD attracts buyers for the second straight day and draws support from a combination of factors.
  • Reduced bets for more aggressive ECB easing in 2024 underpin the Euro and subdued USD demand.
  • Diminishing odds for multiple Fed rate cuts to limit the USD downside and cap gains for the major.
  • Traders might also prefer to wait on the sidelines ahead of the Eurozone CPI and the US NFP report.

The EUR/USD pair trades with a positive bias for the second successive day on Friday, albeit lacks follow-through and remains confined in the previous day's broader trading range during the Asian session. Spot prices currently hover above mid-1.0900s as traders keenly await important macro data from the Eurozone and the United States (US) for some meaningful impetus.

The flash inflation figures for the the Eurozone are due for release at 10:00 GMT and will be followed by the crucial US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) later during the early North American session. The crucial data will play a key role in influencing market expectations about the next policy moves by the European Central Bank (ECB) and the Federal Reserve (Fed), which, in turn, should determine the near-term trajectory for the EUR/USD pair.

Heading into the key data risks, the shared currency is supported by an unexpected upward revision of the Eurozone PMIs on Thursday, which forced investors to pare their bets for more aggressive rate cuts by the ECB. In fact, money markets are pricing 156 basis points (bps) of easing from the ECB this year, about 10 bps less than on Wednesday. This, along with subdued US Dollar (USD) price action, is seen acting as a tailwind for the EUR/USD pair on the last trading day of the week.

The downside for the buck, however, remains cushioned in the wake of reduced bets for multiple and early interest rate cuts by the Federal Reserve in 2024, especially after Thursday's upbeat US labor market report. This remains supportive of elevated US Treasury bond yields. Apart from this, the prevalent risk-off mood could further benefit the Greenback's relative safe-haven status and hold back traders from placing aggressive bullish bets around the EUR/USD pair.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the currency pair's recent corrective slide from the 1.1135-1.1140 area, or a five-month high touched in December has run its course. Nevertheless, the EUR/USD pair remains on track to register heavy losses for the first week in the previous four.

Technical levels to watch

 

Jan 5, 2024

Japanese Yen hits two-week low against USD, bears take breather ahead of US NFP

The Japanese Yen (JPY) trades with a negative bias against its American counterpart for the fourth straight day on Friday, with the USD/JPY pair touching over a two-week high around the 144.85 region during the Asian session.
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Jan 5, 2024

GBP/USD rises toward 1.2700 ahead of US Nonfarm Payrolls

GBP/USD continues its winning streak for the third successive day, trading higher around 1.2690 during the Asian session on Friday.
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