EUR/USD Extends Gains Ahead of the US NFP data

Summary:

EUR/USD is trading higher ahead of the US nonfarm payrolls data. Goldman Sachs expect a strong report with a reading of 1,300k.

EUR/USD is trading higher ahead of the US nonfarm payrolls (NFP) data. The US dollar has been on a decline amid an improving risk appetite. Since Wednesday, the greenback has dropped from 91.43 to the current 90.86. The decline was also triggered by the lower-than-expected US ADP employment report. According to the report, the change in nonfarm private employment was 742,000 in April. While it was higher than March’s 565,000, it missed the estimated 800,000.

The NFP numbers will offer further cues on the inflation status. Analysts at Goldman Sachs expect April’s data to have risen by 1,300k. Furthermore, the bank has estimated that unemployment rate will drop by five-tenths to 5.5%. As for the average hourly earnings, it expects the MoM reading to be rather flat while the YoY figure falls from 4.2% to -0.4%. Better-than-expected readings will be a bearish catalyst for EUR/USD.

EURUSD Technical Outlook

EUR/USD has extended its gains from the previous session. After hitting an intraday low of 1.1993 on Thursday, the currency pair has rebounded to its current 1.2068. This is close to the week’s high of 1.2076. On an hourly chart, it is above the 25 and 50-day exponential moving average. Besides, the formation of a bullish pennant signals that it could move higher.

I expect EUR/USD to break out past the pennant to 1.2080. On the flip side, a move below the pennant’s diagonal line in purple will place the support level at 1.2046. Below that point, the bears will be eyeing the psychological 1.2000.