EURUSD Resilient But Under Pressure Near 1.0880

Summary:
• The euro is fighting back after Thursday's PPI and jobs data gave the dollar propulsion. What awaits EURUSD heading into the weekend?

The US dollar extended its gains against the euro in the Asian session on Friday, as the market reacted to upbeat jobs data and higher-than-expected PPI. EURUSD traded at 1.0880, marginally below its Thursday closing price.

The US economy saw its cost of production rise in February, with the Producer Price Index (PPI) rising by 0.3% to 0.6%. That was significantly above the forecast figure of 0.3%, affirming the CPI data released earlier in the week. Both figures are used as barometers for inflation, and the latest readings increase the likelihood of higher-for-longer Fed interest rates.

In addition to the inflation indicators, the jobs market showed resilience, following a decline in the number of first-time unemployment insurance applications. The Initial Jobless Claims declined from 210k (revised from 217k) to 209k, beating the forecast estimate of 218k.  A strong labour market gives the Federal Reserve strong grounds to maintain the current interest rates. Nonetheless, concerns abound that long-term effects of the 5.25%-5.5% could be detrimental to the economy.

Meanwhile, the dollar’s rise is curtailed by the decline in the February retail sales figures. While the Core Retail Sales (excluding automobiles) improved from -0.8% to 0.3%, it fell below the forecast figure of 0.5%.  Similarly, the headline Retail Sales improved from -1.1% to 0.6%, but fell below the forecast 0.8%.

 Across the Atlantic, the euro got little help from France’s February CPI, which came in at 0.9% month-on-month, meeting expectations. In addition, the yearly CPI beat the forecast estimate by 0.1% to come at 3.0%. ECB executive board member, Philip Lane will speak later on Friday, and his speech could bring fresh impetus to EURUSD heading into the weekend.

Technical analysis

EURUSD has its pivot at 1.0905, and the sellers will be in control if trading stays below this level. A continuation of this momentum will likely break the 1.0860 support, and aim for 1.0840. However, the buyers could build upside momentum if they push the price above 1.0905. Furthermore, a breach of the 1.0920 will invalidate the downward narrative, and potentially push the pair to 1.0935.