Following solid daily advances from early April lows, the EUR/USD is edging higher.
Following the release of the US jobs report, ECB President Lagarde predicted a comeback from a multi-day low.
Recovery efforts are hampered by policymakers’ dithering and Asia’s light schedule.
During the first Asian session on Monday, the EUR/USD grinds higher above 1.1860, following Friday’s recovery from a three-month low. The major currency pair gained from the previous day’s US employment news, as well as comments from ECB President Christine Lagarde. However, the new uncertainty is attributed to comments made by ECB policymakers over the weekend, as well as a lack of noteworthy advances.
Even though the headline Nonfarm Payrolls (NFP) went beyond the 700K expectation and was revised upwards 583K earlier, the US jobs report for June gave rise to hopes of the Fed’s continued loose money policies. The explanation might be related to an increase in the unemployment rate to 5.9% from 5.8%, versus the market consensus of 5.7 percent, and no change in the participation rate of 61.6 percent.
Following the jobs report, market mood improved and the US dollar’s gains were consolidated, with the EUR/USD bottoming out from early April lows. The risk-on swings, however, fade as markets review the cause, which suggests heated inflation and not-so-bad economics, in combination with the US unlocks, to favor monetary policy adjustment prospects, putting a safe-haven bid under the US currency.
Meanwhile, according to Reuters, ECB President Lagarde stated on Friday that the eurozone economy is starting to recover from a pandemic-induced depression, but that the recovery is still fragile. Despite the problems posed by the new inflation data, the central bank’s monetary policies are expected to be maintained.
“Rising inflation in Europe may not be temporary,” Dutch central bank president Klaas Knot warned in the NRC Handelsblad, according to Reuters. “Fears about inflation being too high are unjustified,” stated ECB Executive Board Member Isabel Schnabel.
S&P 500 Futures wobble around a record high after a strong seven-day advance amid these trades and a lack of major catalysts.
Moving on, a lack of important data/events in the US could limit EUR/USD movement. The bloc’s activity data from June, on the other hand, may offer intermediate changes.
The EUR/USD is struggling to maintain its monthly resistance breakthrough, which is now around 1.1830, implying a retest of a downward sloping support line from early May near the 1.1800 level. Meanwhile, the bulls are challenged by the 1.1900, late June high near 1.1975, and the 200-DMA level of 1.2005./n
