The EUR/USD currency pair recently saw a boost, reaching the 1.0550 mark. This development draws attention, especially as expert economists at ING delve deeper into the pair's trajectory, especially in the backdrop of the imminent US Nonfarm Payrolls report. Is EUR/USD Undervalued? A Deep Dive Currently, ING's assessment places the fair value of EUR/USD at 1.0650, implying that the currency pair is hovering around 1% below its intrinsic market drivers. When measured against its 1.5 standard deviation, this position doesn't signal an immediate uptick. Remarkably, even with a consensus in the US payroll figures, there remains potential for EUR/USD to slip beneath the 1.0500 mark.
Euro Gains Traction Despite Various Factors
The Euro has showcased resilience against the US Dollar as the week comes to a close. The currency's momentum towards 1.0550 multi-day highs is noteworthy. In the backdrop, the USD has encountered a decline, with the USD Index (DXY) settling around 106.30. This movement can be partly attributed to an enhanced risk appetite among investors, even as US yields see a minor bounce-back.
Investors and policymakers are in a watchful mode. Speculations suggest the Federal Reserve might maintain the current interest rate, sidelining any hikes for the remainder of the year. On the other side of the Atlantic, there's an ongoing debate about the European Central Bank's (ECB) next move. With inflation surpassing the bank's set target and looming concerns about potential recession or stagflation, the ECB's approach remains under scrutiny.
Economic indicators also shed light on the broader economic landscape. Germany witnessed a 3.9% monthly expansion in Factory Orders in August. In contrast, Italy's Retail Sales retracted by 0.4% in the same month.
A Glimpse into Key Data Points and Potential Market Shifts
The US economic data release will be closely monitored by investors worldwide. Key indicators, including September’s Nonfarm Payrolls, Unemployment Rate, and August's Consumer Credit Change, are slated for release. Additionally, FOMC Governor Christopher Waller, known for his hawkish stance, is scheduled to address the market, potentially offering insights into the Fed's upcoming monetary policy decisions.
Interestingly, EUR has displayed strength beyond the 1.0500 mark against the USD, marking an essential breakout. With US and German yields attempting a modest comeback and ongoing speculations about rate adjustments by both the Fed and the ECB, the market landscape remains dynamic.
Technical Analysis Unveils Potential Movements
The EUR/USD's upward momentum beyond 1.0500 on Friday can't be disregarded. However, with potential selling pressures, the currency pair could be forced to revisit its 2023 low at 1.0448. On the flip side, gaining momentum could pave the way towards the 1.0617 mark, with the critical 200-day SMA at 1.0823 acting as a potential barrier. Beyond this, the psychological threshold of 1.1000 beckons.
Still, investors should be cautious. If the EUR/USD stays below the 200-day SMA, the market could experience intensified bearish pressures.
US Employment Data - A Key Determinant for EUR/USD?
The spotlight today is undoubtedly on the US Nonfarm Payrolls data for September. Analysts at Danske Bank have weighed in on how the EUR/USD pair might react to unexpected employment figures. The forecast suggests that if Nonfarm Payrolls stand at 140K, 30K below consensus, coupled with average hourly earnings at 0.2% MoM (against a consensus of 0.3% MoM), the EUR/USD might witness an upward swing. Such a scenario aligns with the narrative that US data is starting to fall short of market expectations.
