On Monday, the EUR/USD rate was volatile as traders focused their attention on an upcoming European Central Bank decision (ECB), US Nonfarm Payrolls (NFP) and updated US and European Tariffs. The pair traded at 1,0415, down slightly from the high of last week.
ECB interest rate decision
EUR/USD will primarily be affected by the ECB’s interest rate announcement. Reuters polled economists who expect the bank to deliver another 0.25% cut in interest rates, bringing benchmark rate up to 2.50%.
The ECB is one of the most dovish banks, as they have cut interest rates several times. The ECB hopes these rate cuts will stimulate an economy in many countries, such as Germany and France.
The ECB believes that an increase in borrowing will help stimulate the economy. A higher borrowing rate will lead to increased spending from both individuals and companies.
The ECB also worries that Donald Trump’s upcoming tariffs and countermeasures taken by European authorities could affect the economy of the EU at a moment when the recovery is slow.
The manufacturing sector is likely to have improved in February, according to data that will be released Monday. The Spanish PMI for manufacturing is forecast to rise from 50.9 a few months ago to 51.3.
The reading in Italy will be 46,6, a small improvement over 46.3. In France it will read 45,5. Eurozone Manufacturing PMI will be at 47.3. This is up from the 46.6 recorded a month ago. The PMI is still below 50 but there are some signs of improvement.
Flash European inflation data will also be a key factor in the EUR/USD pair. The data is expected to show a drop in the Consumer Price Index headline from 2,5% to 2.3% and a core CPI from 2,7% to 2.50%.
US NFP data ahead
Other important EUR/USD data will be released by the United States Bureau of Labor Statistics, which will release the most recent nonfarm payrolls (NFP).
Economists surveyed by Reuters are expecting the report to reveal that the American economy added 156,000 new jobs in February, after adding 143k a year earlier.
The numbers below will give you more information about Elon Musk’s ongoing job reductions. He is the head of the Department of Government Efficiency. Musk announced major job cuts as part of his efforts to cut costs.
The economists are expecting that additional data will reveal the same unemployment rate of 4.0% and an increase in average earnings per hour by 4.1%.
The market has a new view of the Federal Reserve. Bond and swap markets predict the Federal Reserve will cut interest rates sooner than anticipated as it responds to the slower economy due to the trade war.
Musk’s aggressive budget plan is a response to Trump’s orders for further federal layoffs
Technical Analysis of EUR/USD
Chart of EUR/USD by TradingView
On Monday, the EUR/USD rate traded at 1,0417. This was a few tens of points lower than the high for the entire year so far (1.0523). The 23.6% Fibonacci retracement remains the same.
It has slipped below the moving average of 50 days. The chart has formed a head-and-shoulders pattern in reverse, which is a common reversal signal. The EUR/USD pair is likely to have a breakout in the bullish direction. Next, watch the point at 1,0695 which represents the 50% retracement. The bullish outlook will be invalidated if the EUR/USD pair drops below support level 1.0350.
The post EUR/USD Forecast ahead of ECB Decision, US NFP Data may be updated as new information unfolds
