EUR/USD attempts continuation of sharp uptrend ahead of NFP, ECB

This week’s EUR/USD rebound off the key 1.1100-area support has tentatively salvaged the steep uptrend that has been in place since early April. The EUR/USD pullback last week and early this week as the US dollar regained some footing was short-lived. On Tuesday and Wednesday, the dollar fell back once again and EUR/USD made some significant strides, approaching last week’s year-to-date high around 1.1267 at one point on Wednesday.

As a result of this rebound, EUR/USD has now formed a strongly bullish technical trend that spans the past two months. This steep uptrend includes relatively shallow pullbacks in early May, immediately after Emmanuel Macron’s victory in the French presidential elections, and just last week when the dollar staged the noted bounce. On the immediate horizon are two key economic events that will be of critical importance for the current EUR/USD trend.

Friday brings the always highly-anticipated US jobs report, or non-farm payrolls (NFP), for May. Data from the previous month of April was better than expected virtually across the board, and forecasts for this Friday are currently hovering around 185,000 jobs added in May. Friday’s jobs data will be of exceptional importance, as the next FOMC policy meeting will occur in only two weeks’ time – in mid-June. This jobs report will be critical in potentially helping to shape that Fed meeting, providing some key input as to whether there will be a June rate hike, as widely expected by the markets. Currently, futures markets are pricing-in around an 86% likelihood that the Fed will raise rates by 25 basis points in June, but much could change based upon economic data in the run-up to that meeting, most notably Friday’s jobs report. As always, the dollar could be heavily impacted by the data, especially if there is any sizable deviation from expectations.

On the schedule for Thursday of next week, along with the potentially market-moving UK parliamentary elections, will be the European Central Bank’s (ECB) heavily-anticipated policy meeting. Due to generally rising economic growth and inflationary pressures in the Eurozone, the ECB may look to tighten monetary policy in the foreseeable future. Although no changes to interest rates or its massive asset purchase program are expected at this time, any more-hawkish or less-dovish rhetoric from the ECB next Thursday could provide an extended boost for the euro.

From a technical perspective, if EUR/USD breaks above last week’s noted year-to-date high around 1.1267, and goes on to breakout above the key 1.1300 psychological resistance level, a continuation of the sharp uptrend will have been confirmed. In this event, the next major upside target on an upside follow-through is around the 1.1450 resistance level.

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