Is EURUSD price on a path to $1.1600 following US jobs data?

Summary:

The EURUSD price slid lower Friday afternoon following July's employment number. Could the recovery upswing in hiring force the Euro to a new 2021 low?

The EURUSD price slid lower Friday afternoon following July’s employment number. Could the recovery upswing in hiring force the Euro to a new 2021 low?

The US dollar rallied to a 4-month high against its European counterparty on Friday after July’s Nonfarm payrolls release.

The data showed the US economy added 943,000 jobs in July. This was higher than the expected 870,000 and led to a reduction in unemployment to 5.4% from 5.9 in June.

Furthermore, in an encouraging sign, June’s NFP figure was revised higher by 20,000.

As a result, 10-year yields added to recent gains, climbing above 1.305%, pushing the US Dollar index back towards 93.00 and sending gold plunging.

The drop in unemployment will undoubtedly have traders debating how much longer Fed Chair Jerome Powell can hold out before tightening monetary policy.

This marks the latest boost for the greenback and suggests the EURUSD price may continue to see headwinds as dollar shorts are forced to unwind positions.

Euro vs Dollar outlook

The daily chart shows the pair has been trading in a descending wedge formation for four months.

Last week, the top edge of the wedge at $1.1900 rejected the rally. Therefore, a logical target is now the lower edge at $1.1695. However, April’s 2021 low of $1.1704 provides an additional layer of support ahead of the trend.

Should the EURUSD price extend lower past $1.1695, it’s likely to encourage dollar short-covering, targeting the November 2020 low at $1.1602.

However, if the price holds $1.1695, the immediate pressure will subside, and in that event, the Euro may consolidate. Although, the outlook remains weak for as long as the price remains trapped in the descending wedge. On that basis, a close above $1.1870 invalidates the bearish call.