EUR/USD under pressure on Payrolls – Danske Bank

Sverre Holbek, Senior Analyst at Danske Bank, has assessed the prospects of the pair in light of today’s release of US Non-farm Payrolls.

Key Quotes

“Today’s US nonfarm payrolls (NFP) marks an important end to a week full of key US releases. Overall, the past four days have brought a mixed set of impressions for the state of the US economy but seen in light of their importance, the strong ISM reports have increased the probability of a 2016 Fed hike”.

“Alongside yesterday’s ECB comments denying tapering discussions, this has contributed in returning EUR/USD to levels close to the double bottom of 1.1123 from September”.

“A strong US labour market report would be likely to breach this level, leaving 1.1100 as the next big support level, possibly opening up for a return to the 5 August bottom when NFP surprised strongly on the upside”.

“The NFP releases are notoriously volatile and looking at historical flash NFP releases relative to economist forecast distributions tell a clear story: markets are often taken by surprise”.

“In our base case, however, EUR/USD is unlikely to move lower and we still think the 1.12 levels will continue to act as a revert level for the cross in the coming month, with 1.12 also serving as our 1M forecast”.