EUR/USD, Oil Outlook: Two Trades to Watch

EUR/USD looks to US NFP & ECB Lagarde’s speech

• German industrial output falls, retail sales rise
• NFP is expected to show 225k jobs created.
• EURUSD attempts to break out above the falling trendline

EUR/USD hovers around 1.09 amid a weaker USD and as investors look ahead to a speech by ECB President Christine Lagarde and US non-farm payroll report.

The hawkish ECB stance helped EUR/USD recover from yesterday’s low despite mixed data from the region. Retail sales stalled for a second straight month at 0% but fell -2.9% YoY. Meanwhile, German factory orders unexpectedly rose.

German data is in focus again today as industrial production unexpectedly fell -0.2% MoM in May after rising 0.3% in April, once again raising concerns over the health of the German economy.

Looking ahead, ECB Christine Lagarde is due to speak. In recent speeches, the ECB President has been clear that the central bank still has more work to do to tame inflation.

However, today’s main focus will be the US non-farm payroll, which is expected to show that 225k jobs were added in June, after 339k in July. Unemployment is expected to tick lower to 3.6%, and wage growth is set to remain solid at 4.3%

The data comes after ADP payrolls smashed forecasts yesterday, up 497k, well above the 228k forecast, and as ISM services PMI also beat expectations.

Strong job growth and solid growth in the dominant services sector could fuel hawkish Fed bets, lifting the USD.

The market is currently pricing in a 90% probability of a 25 bps hike in July.

EUR/USD outlook- technical analysis

EUR/USD found support on the 100 sma at 1.0830 and rebounded high, pushing above the 50 sma and the 3-week falling trendline. Buyers will be looking for a rise above 1.0935, the weekly high, to extend gains towards 1.10 the psychological level and 1.1010 the June 2023.

Meanwhile, sellers will look for a break below 1.0830 to create a lower low, bringing 1.0795, the multi-month rising trend line support, into play.

Oil rises after an inventory draw & ahead of US jobs data

• US oil inventories fall by 1.5 million barrels
• Will strong jobs data ease recession fears
• Oil breaks out of descending triangle & above 50 sma

Oil prices are extending gains and are on track for US oil inventories which offset fears of higher US interest rates.

US crude oil inventories fell more than expected on strong refining demand while gasoline inventories also posted a large draw after an increase in driving across the week. Stockpiles fell 1.5 million barrels for the week ending June 30^th, against the 983k forecast.

Meanwhile, robust U S data has helped lift the outlook for the US economy and ease recession fears. The US ADP report smashed forecasts with 497k, well above 228k forecasts.

Looking ahead, the US NFP will be in focus. Expectations are for a further 225k jobs to be added. While a robust labour market could ease worries over a downturn in the US, it also raises the possibility that the Federal Reserve will raise interest rates higher and for longer.

Later in the session, Baker Hughes rig count data will be in focus.

Oil outlook – technical analyst

Oil breaks out of the descending triangle, rising above the 50 sma and looking towards resistance at 72.70, the mid-June high. This, combined with the RSI above 50 keeps buyers hopeful of further upside.

A rise above 72.70 exposes the 100 sma at 73.50 ahead of 75.00, the June high.

Meanwhile, support can be seen at 70.35, the confluence of the falling trendline support, and the 20 sma, with a break below here opening the door to 67.00, the June low.