In a remarkable Friday surge, the EUR/USD pair notched a gain of over 1%, pushing its value close to 1.0730. The US dollar, as indicated by the DXY index, is poised to conclude the week with a substantial 1.40% decline. This notable depreciation of the dollar can be attributed to the Federal Reserve’s dovish monetary policy stance and lackluster Non-Farm Payrolls (NFP) data for October, which collectively contributed to the dollar’s downward trajectory.
Friday’s trading session witnessed an impressive ascent of the EUR/USD, reaching the 1.0730 mark and wrapping up a week of remarkable gains totaling 1.50%. This performance stands as the pair’s most noteworthy since the middle of June.
Driving the pair’s daily market dynamics was a widespread weakening of the US dollar, attributed to the Federal Reserve’s pivot toward a more dovish policy stance. The Fed’s indication of nearing the conclusion of its tightening cycle, announced on Wednesday, reverberated across the financial landscape. In response to this shift, US Treasury yields dipped to their lowest levels since September, with the 2-year, 5-year, and 10-year rates declining to 4.84%, 4.50%, and 4.57%, respectively. This collective shift exerted additional downward pressure on the greenback.
In the most recent employment report released on Friday, the United States revealed a job market that fell short of expectations for October. The unemployment rate edged up to 3.9%, and average hourly earnings showed a milder increase than initially predicted. This development, indicating a potential slowdown in the labor market, further stoked expectations of a dovish stance from the Federal Reserve.
The CME FedWatch tool reflected this sentiment, with the likelihood of a 25 basis point interest rate hike in December plummeting to nearly 9%. This downward shift in market expectations added to the pressure weighing on the US dollar’s value.
EUR/USD Technical Outlook
The price level of $1.04583 assumed a crucial role as a pivotal support in early October, effectively halting a long-term bearish trend that had commenced in mid-July. Subsequently, bullish sentiment began to prevail. However, the progress of the bulls throughout October was notably sluggish. By the end of the month, the market had established a higher support level at $1.0562. As October concluded, market activity gained significant momentum.
The Relative Strength Index (RSI) depicts a robust and swiftly advancing market, particularly evident between yesterday and today. With the RSI currently at 61.58 and showing signs of gaining traction, there is anticipation that the market is poised to reach the $1.08000 price level in the forthcoming week.
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