EUR/USD rose by 0.7% on Thursday, edging closer to the 1.0600 level, as the euro found support from better-than-expected retail sales data in the Eurozone. However, the European Central Bank’s (ECB) anticipated rate cuts and a cautious market sentiment ahead of the US Nonfarm Payrolls (NFP) report continued to weigh on the pair.
Eurozone Retail Sales Exceed Expectations, But Economic Slowdown Persists
Eurozone retail sales grew by 1.9% year-on-year in October, surpassing the forecast of 1.7%. However, the growth slowed significantly from September’s revised 3.0%, highlighting the ongoing challenges in the region’s economic recovery. Despite the positive surprise, lagging economic activity has prompted the ECB to accelerate its pace of rate cuts, with a quarter-point reduction expected next week. ECB President Christine Lagarde reaffirmed the central bank’s commitment to supporting growth, despite rising inflationary pressures. She suggested that a short-term uptick in inflation in Q4 will subside in 2025, paving the way for further easing.
Political Uncertainty in France and US Job Data Awaited
Despite growing political turmoil in France, investors have largely brushed off the effects on the euro. French President Emmanuel Macron remains firm in his position, following a no-confidence vote, but will appoint a new Prime Minister in the coming days to address political instability.
In the US, Initial Jobless Claims for the week ending November 29 climbed to 224,000, the highest in six weeks, missing expectations of 215,000. Additionally, Challenger Job Cuts for November increased to 57,727, signaling some weakness in the labor market. However, these mid-tier data points are overshadowed by the highly anticipated NFP report on Friday. Economists are expecting a strong rebound in job gains, with 200,000 jobs projected to be added in November following October’s much weaker-than-expected increase of just 12,000. The previous month’s poor performance was attributed to layoffs caused by hurricanes and labor strikes, and market participants are hoping for a healthier recovery.
EUR/USD Technical Outlook: Bullish Momentum Building
On the technical front, EUR/USD has entered a consolidative phase after a sharp downtrend that began in mid-July. The pair recently bottomed out near 1.0450 in late November, a crucial support level. Following this low, EUR/USD has seen a modest rebound, trading above 1.0500 and finding resilience near 1.0588 as of the latest session.
The daily chart shows a strong bullish candle, with a gain of +0.71%, indicating growing upward momentum. The pair has cleared short-term resistance at 1.0550, setting its sights on the psychological 1.0600 mark. A move above 1.0600 would likely signal a bullish breakout, with the next target being the 50-day EMA at 1.0715, aligning with the November swing high. A break above this level could confirm a trend reversal and pave the way for a move toward the 200-day EMA, currently at 1.0834.
On the downside, the MACD indicator remains in negative territory, though the histogram is shrinking, suggesting that bearish momentum is fading. Should the recovery falter, EUR/USD may test support around 1.0500, with the 1.0450 low acting as a key line for bulls to defend. A daily close above 1.0600 would solidify the bullish outlook, while a drop below 1.0550 could bring bearish pressure back into play.
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