EUR/USD takes out February low ahead of US jobs report

EUR/USD Outlook

EUR/USD takes out the February low (1.0533) following the failed attempts to trade back above the 50-Day SMA (1.0723), and developments coming out of the US may keep the exchange rate under pressure as the Non-Farm Payrolls (NFP) report is anticipated to show another rise in employment.

EUR/USD takes out February low ahead of US jobs report

EUR/USD fails to defend the opening range for March as Federal Reserve Chairman Jerome Powell warns of a higher trajectory for US interest rates, and the exchange rate may struggle to hold above the January low (1.0483) amid growing speculation for a 50bp Fed rate hike.

According to the CME FedWatch Tool, market participants are pricing a greater than 70% probability for the Fed funds rate to increase to a fresh threshold of 5.00% to 5.25% on March 22, and it remains to be seen if Chairman Powell and Co. will project a steeper path for US interest rates as the central bank is scheduled to update the Summary of Economic Projections (SEP).

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Until then, data prints coming out of the US may sway EUR/USD as the US economy is expected to add 203K jobs in February, with wage growth anticipated to show a similar dynamic as Average Hourly Earnings are projected to increase to 4.8% from 4.4% per annum in January.

Further evidence of a tight labor market is likely to increase the Federal Open Market Committee’s (FOMC) scope to pursue a more restrictive policy amid signs of sticky inflation, and a positive development may lead to a bullish reaction in the Greenback as market participants brace for higher US interest rates.

With that said, another rise in US employment along with signs of strong wage growth may lead to a test of the January low (1.0483) as EUR/USD struggles to trade back above the 50-Day SMA (1.0723), but the exchange rate may track the flattening slope in the moving average if it continues to defend the opening range for 2023.

Euro Price Chart – EUR/USD Daily

Chart Prepared by David Song, Strategist; EUR/USD on TradingView

• EUR/USD trades to fresh monthly low (1.0524) after failing to push back above the 50-Day SMA (1.0723), and the exchange rate may attempt to test the January low (1.0483) as long as it holds below the moving average.
• Failure to defend the yearly opening range may push EUR/USD towards the December 2022 low (1.0393), with a move below 1.0370 (38.2% Fibonacci extension) raising the scope for a run at the 200-Day SMA (1.0326).
• However, lack of momentum to test the January low (1.0483) may lead to range bound conditions in EUR/USD, with a move above 1.0610 (38.2% Fibonacci retracement) bringing the 50-Day SMA (1.0723) back on the radar.

--- Written by David Song, Strategist

Follow me on Twitter at @DavidJSong