EUR/USD and crude oil forecast: Will NFP matter? | Forex Friday

Today we have the US jobs report due for release, and the big question is whether it will actually matter for markets. At the moment, the overwhelming focus is on Iran and the broader Middle East situation—particularly what is happening with oil prices. Against a backdrop of rising crude oil prices, the near-term EUR/USD forecast remains titled to the downside, even if we get a miss on the jobs data today.

 

 

What to expect from the non-farm jobs report?

 

The US jobs report is scheduled for 13:30 London time. Expectations are for a headline payroll print of around 58,000, which would mark a significant slowdown from the 130,000 reported in the previous month. The unemployment rate, meanwhile, is expected to remain unchanged. As for average hourly earnings, forecasts point to a monthly increase of 0.3%, slightly softer than the pace seen previously.

So, will it matter? That’s the key question. We also have voting FOMC members speaking today, so there are a few potential catalysts on the calendar. However, in reality, markets right now appear to be driven almost entirely by developments in the Middle East and the knock-on impact on oil prices.

 

Crude oil forecast remains tilted to upside on Middle East tensions

 

Looking at crude oil, the rally has been quite striking. Prices have pushed to fresh highs for the week, and on the hourly chart we’ve now moved above the $88 per barrel mark. As the situation in the region deteriorates and with no clear end in sight to the conflict, energy markets are reacting accordingly. It looks like Brent could be reaching $90 today and it could possibly head further higher.

That surge in oil has been feeding through to other asset classes as well, particularly against European stock markets, which tend to be highly sensitive to energy costs. The reason is fairly straightforward: many European economies rely heavily on imported energy. When oil prices spike, it effectively acts as a tax on growth, weighing on both corporate margins and consumer spending.

For that reason, European equities—and broader risk assets—have struggled whenever oil prices move sharply higher.

At the moment, the path of least resistance for risk assets appears to be to the downside. Unless we see some form of de-escalation in the Iran situation, and unless crude oil stops making higher highs and higher lows, that bearish bias is likely to remain in place.

 

EUR/USD forecast: Is 1.15 handle on the cards?

 

It has also been a difficult week for EUR/USD. Again, the energy dynamic plays an important role here. Because many European economies are heavily dependent on energy imports, rising oil prices tend to be negative for the region’s economic outlook. That weakness has already been reflected in both equity markets and the euro.

From a technical perspective, EUR/USD forecast remains bearish. Price is now hovering around a very important level—the January low of 1.1578. We have tested that area over the past couple of days but have yet to see a decisive daily close below it. The key question is whether that changes today.

If we do get a decisive break beneath that level, the next downside target would likely be the 1.1500 area, which isn’t particularly far from current levels. Below 1.1500, further support sits around 1.1400 and the surrounding zone, as he head towards the low $1.10s.

So, for the euro as well, the path of least resistance appears to be to the downside—and that bias is likely to remain as long as oil prices continue to grind higher, and even if we see a weaker US jobs report today.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R