The EUR/USD pair is navigating choppy waters as it hovers below the 1.0800 level, with investors’ attention riveted on the upcoming US Nonfarm Payrolls (NFP) data.
Key Points:
📉 EUR/USD Struggles: The pair struggles near 1.0791 amid a bleak Eurozone economic outlook.
🌍 Eurozone GDP Stalls: Q3 reports show stagnation, intensifying ECB rate cut speculations.
🇺🇸 US Jobs Data Awaited: Eyes on US NFP and Unemployment Rate for market direction.
As the Asian trading session commenced this Friday, December 8, 2023, the EUR/USD pairing found itself in a precarious position, unable to breach the pivotal 1.0800 mark. The pair currently trades at 1.0791, experiencing a modest 0.03% decline for the day. This price action mirrors the underlying economic uncertainties in the Eurozone and anticipations of monetary policy shifts by the European Central Bank (ECB).
In a surprising turn of events, the Eurozone’s Gross Domestic Product (GDP) for the third quarter of 2023 stagnated, registering a 0% year-on-year growth compared to the previous 0.1%. This figure falls short of market expectations, signaling a potential economic slowdown. Furthermore, the quarterly growth figures also showed a contraction of 0.1%, aligning with forecasts but painting a bleak picture of the region’s economic health.
The ECB, under the scrutiny of board member Isabel Schnabel’s recent remarks, is facing heightened expectations of impending rate cuts. Initially advocating for continued rate hikes to combat inflation, Schnabel adjusted her stance following a series of lower-than-expected inflation readings. Market analysts are now predicting an accelerated timeline for ECB rate reductions, with the first cut potentially occurring as early as March 2024.
Meanwhile, in the United States, the labor market depicted a mixed landscape. The latest data from the US Labor Department indicated an unexpected rise in Initial Jobless Claims for the week ending December 1, reaching 220K, marginally below the forecasted 222K. On a positive note, Continuing Claims dropped to 1.861 million, surpassing the consensus estimate of 1.919 million.
As the week progresses, the focus intensifies on the US employment report due for release on Friday. This report encompasses several critical indicators, including Nonfarm Payrolls, expected to see a 180K increase, and the Unemployment Rate, projected to hold steady at 3.9%. Additionally, the Average Hourly Earnings and the University of Michigan’s Consumer Sentiment Index will provide further insights into the US economic condition. These indicators are pivotal for traders, as they offer valuable insights and potential opportunities for strategizing around the EUR/USD pair in the forex market.
Based on the provided EUR/USD charts and fundamental data, here’s a comprehensive analysis and a trading plan:
Technical Analysis:
Daily Chart (D1):
- The price is below the Ichimoku cloud, indicating bearish sentiment.
- The MACD is below the zero line but the histogram is ticking upwards, suggesting a potential for bullish momentum.
- Stochastic RSI is near oversold territory, indicating possible exhaustion of the current downtrend.
4-Hour Chart (H4):
- The price is oscillating around the Ichimoku cloud, which could indicate indecision in the market.
- The MACD is hovering around the zero line, which might suggest a lack of strong momentum.
- Stochastic RSI is neutral, implying that the market could sway in either direction.
1-Hour Chart (H1):
- Price action is below the Ichimoku cloud, confirming the bearish bias in the shorter term.
- The MACD line is below the signal line but appears to be converging, indicating a potential shift in momentum.
- Stochastic RSI is pointing upwards from oversold levels, suggesting a potential upward correction or reversal.
Fundamental Analysis:
- Eurozone GDP was reported at 0% YoY, indicating no growth, which could dampen investor sentiment towards the Euro.
- US Jobless Claims were higher than expected, indicating potential weakness in the labor market.
- Upcoming US NFP data and Unemployment Rate will be crucial. If Nonfarm Payrolls are below expectations and the Unemployment Rate rises, it could signal economic weakness, possibly weakening the USD.
Market Sentiment:
The market sentiment appears to be cautious ahead of the US NFP data, with the Euro already under pressure from disappointing GDP data. The market is pricing in possible ECB rate cuts, which could weaken the Euro further.
Trade Idea Details:
- CURRENCY PAIR: EUR/USD
- CURRENT TREND: Short-term bearish, long-term indecision
- TRADE SIGNAL: Based on the technical indicators, a potential bullish correction could be anticipated; however, it’s crucial to wait for the US NFP data before confirming any bullish bias.
Entry Strategy:
- 👉ENTRY PRICE: A conservative entry would be after a bullish confirmation post-NFP. If NFP is weaker than expected and the EUR/USD breaks above the H1 Ichimoku cloud, an entry around 1.0800 could be considered.
- ✅TAKE PROFIT: Set initial take profit at a recent swing high or a significant resistance level, potentially around 1.0850.
- ❌STOP LOSS: A stop loss should be placed below the most recent swing low or a significant support level, potentially around 1.0750.
Confirmation:
- Technical: Entry after a bullish candlestick pattern above the H1 Ichimoku cloud.
- Fundamental: Weaker than expected US NFP data, signaling USD weakness.
- Sentiment: Shift in market sentiment to a more risk-on approach, benefiting the EUR.
Please note, this trading plan is based on the current market analysis and is subject to change following the release of the US NFP data and any unexpected geopolitical events. Always use proper risk management and adjust the plan according to real-time market conditions.