The euro is trading above USD 1.09, hitting its strongest point since mid-January on Friday, helped by news from both the US and Europe.
Friday’s news showed that the US labor market is weakening:
→ The change in employment in the non-farm sector showed an increase in jobs = 275k for the month, although last month it was = +353k.
→ The unemployment rate rose to 3.9%, although it was 3.7% for 3 months.
News of a weakening labour market could put pressure on the Fed to ease monetary policy.
Meanwhile in Europe, the ECB kept borrowing costs at a record high, citing significant progress in containing inflation, and revised its inflation expectations downward, forecasting price growth of 2.3% in 2024, and 1.9% in 2025. And during a press conference last Thursday, ECB President Lagarde told reporters that policymakers had not discussed rate cuts at that meeting.
Thus, there is reason to believe that the Fed will start lowering rates earlier (it started raising them earlier than the ECB). And this assumption is shared by many market participants, judging by the bullish dynamics in the EUR/USD market.
Today’s chart shows:
→ the price of EUR/USD has been moving within an ascending channel (shown in blue) since mid-February. Moreover, it seems that the median line acts as resistance — Friday’s peak indicates this;
→ the price rose to the important psychological level of 1.1000 – it served as resistance in January;
→ the RSI indicator is in the overbought zone, forming a bearish divergence.
If there is some correction this week after an increase of more than 0.9% last week, then the price of EUR/USD may fall to its lower limit. Failure of the bulls to resume the uptrend from this line could mark the prospect of a decline in price towards the important support of 1.0870.
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