In the North American session on Friday, EUR/USD is facing selling pressure near the intraday high of 1.1355. The major currency has pulled back from its earlier high as the US Dollar (USD) gains strength following the release of the US Nonfarm Payrolls (NFP) data for April. The US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, is also on the rise at 99.60.
According to the NFP data, the US economy added 177K new jobs in April, surpassing estimates of 130K but slightly lower than the revised March reading of 185K (previously reported at 228K). The unemployment rate remained steady at 4.2%, as predicted. Meanwhile, the Average Hourly Earnings data, a key measure of wage growth, showed a moderate increase of 0.2% on a monthly basis, compared to estimates and the previous release of 0.3%. The measure also showed a steady year-on-year growth of 3.8%, falling slightly below expectations of 3.9%.
These stronger-than-expected job growth figures suggest that the US President Donald Trump’s tariff policy has not had a significant impact on demand for labor, which may weaken expectations of an interest rate cut by the Federal Reserve (Fed) at their June meeting. The CME FedWatch tool indicates that there is almost a 50% chance of a rate cut in June, after the Fed left interest rates unchanged at 4.25%-4.50% in May.
Earlier in the day, despite hopes of easing trade tensions between the US and China, the US Dollar was performing below expectations compared to other currencies. Investors have been optimistic about a possible de-escalation of the Sino-US trade war, following comments from the Chinese Commerce Ministry expressing a willingness to engage in trade talks with the US.
According to a Bloomberg report, China says the door is open to trade talks and has urged the US to show sincerity if they want to negotiate. From Washington, President Trump has also expressed confidence in reaching a trade deal with China. In an interview at NewsNation Town Hall on Thursday, Trump stated that there is a good chance a deal will be reached, but that it would be done on the US’s terms. He also mentioned the potential for trade deals with South Korea, Japan, and India.
In theory, this situation should benefit the US Dollar as it reduces concerns about a decline in consumer purchasing power. Investors were anticipating that higher tariffs would be passed on to customers by US employers, diminishing their ability to spend. However, on Friday, EUR/USD has risen above the key level of 1.1300 after hitting a two-week low of 1.1265 on Thursday. The major currency pair recovered after finding support near the 20-day Exponential Moving Average (EMA) around 1.1260.
The 14-day Relative Strength Index (RSI) is currently within the 40.00-60.00 range, indicating that the bullish momentum has paused for now. Nonetheless, the upward trend is still intact. Looking ahead, the psychological level of 1.1500 will be a significant resistance level for the pair, while the 25 September high of 1.1214 will be a key support level for Euro buyers.
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