As shown by today’s EUR/USD chart, the rate rose this morning to 1.096 – its highest level since mid-March.
On one hand, this was driven by the weakness of the dollar. The USD fell sharply against other currencies following the release of labour market news on Friday (data from ForexFactory hereafter):
→ The unemployment rate reached 4.3% – the highest since autumn 2021;
→ In July, employers created only 114,000 jobs (excluding the agricultural sector) compared to the forecast of 175,000. Last month’s figure was 179,000;
→ Wage growth is showing signs of slowing down.
The rapid deterioration of the labour market is an early sign of a recession. This is indicated by the rule of Claudia Sahm, who worked at the Federal Reserve for over 10 years.
On the other hand, the EUR/USD is rising due to the strength of the euro. Today, the Purchasing Managers’ Index (PMI) figures were released in Europe – all are above the 50.0 level, indicating growth in the Eurozone economies.
As today’s technical analysis of the EUR/USD chart shows:
→ The price movement since mid-April has formed the bounds of an upward channel (shown in blue);
→ This morning, the price is above the upper boundary, and the RSI indicator points to a strongly overbought market;
→ The price is close to a resistance block formed by the psychological level of 1.1 and the April high around 1.098.
This creates a vulnerable situation for a false breakout of the resistance block.
Thus, the EUR/USD rate may form a similar pattern to what happened with GBP/USD:
→ On 18 July, we noted bearish signs when it breached the psychological level of 1.300;
→ Over the following 15 days, the rate dropped by approximately 2.5%.
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