EUR to USD Outlook: The Impact of US Initial Jobless Claims

EUR to USD Outlook: The Impact of US Initial Jobless Claims

The EUR to USD rate shows potential for further gains as the US Dollar weakens and German economic data impacts sentiment. Here’s a breakdown of the key factors influencing the market.

US Dollar Softens

The euro rate has risen for two consecutive days, nearing the 1.0550 area, bolstered by a weaker US dollar. This move comes after the dollar pulled back from its ten-month lows. However, the overall trend remains bearish, with the next direction hinging on US jobs data.

German Economic Indicators

Germany reported a larger-than-expected decline in exports for August (-1.2% vs. -0.4%) and an unexpected contraction in imports (-0.4% vs. 0.5%). Imports are 16.7% lower compared to the previous year. These figures support the view that the European Central Bank (ECB) is unlikely to raise interest rates further.

US Labor Market Conditions

In the US, despite a soft ADP report on Wednesday, Jobless Claims data indicates tight job market conditions. However, US yields declined further from multi-year highs. The weakening of the Greenback can also be attributed to a recovery in equity prices.

Nonfarm Payrolls Anticipation Affecting the Euro Rate

The upcoming US Nonfarm Payrolls report on Friday will likely determine the US dollar’s direction. Expectations are for an increase of 170,000 jobs and a slight decrease in the Unemployment Rate to 3.7%. A strong report could trigger a resumption of the EUR/USD bearish trend, while weak numbers could expand the scope for further recovery.

Euro Rate Technical Outlook

After hitting a ten-month low of around 1.0450 on Tuesday, the euro started a recovery, accumulating a gain of over a hundred pips. If there is a daily close above 1.0630, it would strengthen the outlook for the euro. On the 4-hour chart, the euros to dollars continue to move within a downward channel but have moved away from the lower boundary. Considering the recent recovery and the potential for further strength, it may be a favourable time to buy euros.

Potential for Further Gains

The EUR to USD rate is delicate, influenced by German economic data, US labour market conditions, and anticipation for the Nonfarm Payrolls report. Traders should keep a close eye on these factors to navigate potential shifts in the market.