Daily Market Recap – EURUSD in bearish outlook after NFP release and BoE/ ECB rate decisions

The EURUSD continued to be under pressure on Friday, having tested its early October low of around $1.1530. The single currency is being hurt by a sharp drop in expectations for an ECB rate hike, with Christine Lagarde saying on Thursday that there will likely be no hike next year, while market participants were expecting a 10-bps increase.

The Bank of England's (BoE) unexpected decision not to raise rates also helped strengthen the dollar to the detriment of the euro.

Market participants had fully priced in a 10-bps rate hike from the BoE (according to the SONIA curve), but the central bank justified the decision by the recent expiration of the unemployment program put in place at the beginning of the pandemic. Officials prefer to wait a few months to see how the labor market will react before raising rates.

The dollar was therefore supported by the dovish tones of the ECB and BoE and boosted by the monthly U.S. jobs report. The consensus stood for 450,000 jobs created in November and the unemployment rate to fall to 4.7%, with actual figures coming in at 531,000 jobs created and 4.6% unemployment.

The better-than-expected readings are bolstering the prospects for Fed tightening, which is positive in supporting the dollar and maintains pressure on the euro as a result.

From a technical perspective, the outlook will likely turn bearish again in the near term as sellers eye the October low of $1.1530 as a signal of a potential downside breakout. A daily close below this level would pave the way for a continuation of the underlying downtrend. The next support to watch would be the symbolic threshold at $1.15, followed by the June 2020 high at $1.1422.

 (Chart Source: Tradingview 07.11.2021)

With no daily close below $1.1530, the risk/reward ratio favors short-term buyers above this support. Traders may look to short the EURUSD based on the unfavorable fundamentals while keeping an eye for the price action in the run-up to $1.1530.

Support & Resistance Levels:

R3       1.1909

R2       1.1802

R1       1.1692

S1        1.1530

S2        1.1350

S3        1.1180

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.