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EUR/USD looks to end week flat near 1.16 handle

  • EUR/USD is down more than 50 pips on Friday.
  • Upbeat data from the U.S. back the case for a hawkish Fed stance in 2018.
  • DXY is likely to remain as the primary driver of the pair's price action.

After edging higher toward the 1.17 handle with the initial USD sell-off following the NFP data, the EUR/USD quickly turned negative on the day and lost nearly 100 pips in the NA session. As of writing, the pair was trading at 1.1605, losing 0.45% on the day.

Labor market continues to tighten in the U.S.

According to the data released by the U.S. Bureau of Labor Statistics, nonfarm employment growth rebounded to 261,000 in October as the negative impact of hurricanes seen on September's data faded away. Furthermore, the unemployment rate fell by 0.1% to 4.1%, the lowest level since 2000. Although the details of today's report showed that the annual wage growth eased to 2.4%, markets' expectation of a December rate hike didn't change. In fact, J.P. Morgan said that after today's data, they were forecasting the Fed to raise rates four more times in 2018 instead of their previous estimate of three.

Later in the session, Minneapolis Fed President Neel Kashkari, a dovish FOMC member, said that there were still signs of some slack in the labor market but failed to prevent the greenback's late rally. Upbeat PMI data released by the ISM, which pointed to a healthy growth in the service sector's business activity, provided an additional boost to the DXY. The US Dollar Index is now at 94.85, slightly below its daily high of 94.92, still up 0.23%.

  • US ISM Non-manufacturing: New orders point to continued growth - Wells Fargo

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "in the daily chart, the price remained below a bearish 20 DMA, which gained bearish traction after breaking below the 100 DMA, while technical indicators resumed their declines after a modest upward correction within negative territory. October low at 1.1574 is still the key support, with a break below it exposing the 1.1460 region for the upcoming week. The level will be quite hard to break without a macroeconomic catalyst, and the calendar for next week has little to offer on that side. Resistances, in the case of a recovery, are located at the mentioned 1.1660/70 region, ahead of 1.1745."

Today's data from the US

  • US: Service sector business activity growth remains strong in October - Markit
  • US: Total nonfarm payroll employment rose by 261,000 in October
  • US: Goods and services deficit at $43.5 bln in Sep, up $0.7 bln from $42.8 bln in Aug
  • US: ISM non-manufacturing PMI rises to 60.1 in October from 59.8 in September

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