The EUR/USD pair surged on Friday after the latest US non-farm payroll numbers. The pair ended the week at 1.2163, which was 1.50% above the lowest level during the week. It has surged by almost 4% since the beginning of April.
US non-farm payrolls data
Before Friday, all indications were that the US would report strong non-farm payrolls numbers. Furthermore, on Wednesday, data by Automatic Data Processor (ADP) showed that the economy had added more than 700,000 jobs in April.
Further, data by Markit and the Institute of Supply Management (ISM) had shown that the economy’s manufacturing and services sectors continued to fire on all cylinders in April.
Most importantly, on Thursday, data by the Labor Department showed that the number of initial jobless claims declined to below 500,000 in the previous week. That was the first time the number moved below 500k since the pandemic started.
Therefore, Friday’s non-farm payrolls were surprising. They showed that the economy added less than 300k jobs while the unemployment rate rose from 5.9% to 6.1% in April. Therefore, the data are evidence that the Fed was right in that the economic recovery was still uneven. As such, the bank could take more time before it tightens. Still, EUR/USD traders will be looking at more numbers later this month.
Also, there will be a focus on policy measures since many analysts attribute the current government stimulus as having a role on low employment rate. In a note, analysts at ING wrote:
“A pretty woeful jobs report for April is likely more a reflection of structural rigidities and supply constraints rather than any meaningful weakening in demand for labour.”
EUR/USD weekly forecast
This week, the EURUSD pair will react to several economic numbers from the European Union and the United States. On Tuesday, it will react to the German ZEW business surveys and the US JOLTs job opening numbers. Several Fed members like Lael Brainard and Williams will speak.
On Wednesday, the pair will react to the latest US consumer price index (CPI). Analysts expect that the headline CPI rose from 2.6% to 3.6% in April. On Thursday, it will react to the latest initial jobless claims numbers followed by retail sales on Friday.
EURUSD technical analysis
On the four-hour chart, we see that the EUR/USD pair had been forming a bullish flag last week. This pattern is shown in black and is usually a sign that the price will rebound. This happened on Friday after the weak US non-farm payrolls data. The pair has also moved above the 25-day and 50-day moving averages and the previous high at 1.2150.
Therefore, it seems like bulls have prevailed. As such, there is a possibility that the price will bounce back as bulls target the year-to-date high at 1.2240.