- EUR/USD gained more than 1% on Friday, rising near 1.0730.
- The USD, as measured by the DXY index, closes with a weekly loss of 1.40%.
- The Fed’s dovish stance and weak October NFP sent the USD tumbling.
In Friday’s session, EUR/USD it soared to 1.0730 and closed the week with a gain of 1.50%, its best performance since mid-June.
Daily market moves for the pair included broad-based weakness in the USD as the Federal Reserve (Fed) changed its tone to a more dovish stance and signaled an end to the tightening cycle on Wednesday. In response, US Treasuries fell to their lowest level since September, with 2.5 and 10-year yields falling to 4.84%, 4.50% and 4.57%, adding further selling pressure to the dollar.
On Friday, the US reported that the US economy added fewer jobs than expected in October, while the unemployment rate rose to 3.9% and average hourly earnings rose less than expected. As the job market shows signs of cooling, this has prompted more dovish bets Fed and according to CME’s FedWatch tool, the probability of a 25 basis point hike in December fell to nearly 9%, exacerbating the USD’s slide.
The market’s focus will now shift to inbound data as, despite the change in tone, the Fed has left the door open for further tightening. By December, the bank will receive two more inflation figures and a report on more jobs.
EUR/USD levels to watch
Neutral to bullish after evaluating the daily chart view in the short term it can be seen that the bulls are gradually regaining their strength. The Relative Strength Index (RSI) is pointing up in bearish territory, suggesting a potential momentum shift and a bullish recovery, while the Moving Average Histogram (MACD) represents larger green bars.
On the 4-hour chart, the pair has reached overbought conditions, suggesting that a technical correction may be coming in the immediate short term.
Support levels: 1.0700, 1.0670, 1.0630.
Resistance levels: 1.0750, 1.0770, 1.0800.