Euro (EUR/USD) Analysis and Charts

• EUR/USD’s impressive run higher continues
• The market shrugged off weaker German and French numbers
• Focus remains overwhelmingly on the US labor market

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The Euro was higher again against the United States Dollar on Friday as shaky eurozone economic data didn’t deflect markets from optimism that US interest rates could start to fall this year, possibly as soon as September.

German industrial production shrank unexpectedly in May, official figures showed, with a 2.5% on-month contraction mocking the markets’ hopes for a 0.2% rise. France’s trade gap also yawned ahead of expectations, coming in at EUR8 billion ($8.6 billion), rather than the EUR7.2 billion tipped beforehand.

At face value, this doesn’t look like the recipe for a seventh straight day of gains for EUR/USD, but that’s what we’re looking at.

Of course, official US payroll data will be the ultimate decider. That’s coming up on top of the economic bill later in the global day. This week has already seen some evidence that the labor market is softening. Jobless claims rose by 238,00 in the week ending on June 29, slightly above forecasts.

The financial markets are looking for a June rise of 190,000 nonfarm payrolls, well below April’s 272,000, and a steady overall jobless rate of 4%. Expect on-target or weaker data to keep early rate cuts very much on the table, while any upside surprises could see the Dollar take off once more, although bulls will have a lot to do if they’re going to counteract the considerable momentum weighing on the greenback against many major rivals.

EUR/USD Technical Analysis

EUR/USD Daily Chart Compiled Using TradingView

EUR/USD has seen an impressive surge higher since the end of June when it bounced of the quite well-respected uptrend line which has been in place since the lows of October 2023.

Bulls now eye resistance at the 1.08438 mark, which is also the first Fibonacci retracement of the rise to June 4’s significant high from the lows of mid-April,

Above that lies the downtrend line from December 28 which has capped the market since and may continue to do so at least in the medium-term. The Euro may be running out of steam after such an impressive run higher and it may be getting ahead of the fundamentals. The Eurozone economy remains torpid and the chances of further interest-rate reductions is at least as high as it is in the US.

How far any consolidation occurs below current levels could be key for EUR/USD sentiment. A test of nearby support at 1.07964 probably wouldn’t be too alarming for the bulls, but a probe lower toward 1.07 and below might set alarm bells ringing and put the market on alert for a deeper fall.

–By David Cottle for DailyFX