EUR/USD advances as US Dollar tumbles due to weak US NFP and Services PMI – Crypto News

• EUR/USD rises to near 1.0800 as the US Dollar weakens after poor NFP data.
• The ECB is widely anticipated to start reducing interest rates in June.
• The Fed sees rate cuts this year despite little progress in disinflation in the first quarter.

EUR/USD soars to 1.0800 as the US Dollar weakens in Friday’s early American session. The US Dollar faces an intense sell-off as the United States Bureau of Labor Statistics (BLS) has reported that labor demand remains weak and wage growth slowed in April. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has printed a fresh three-week low near 104.50.

The market sentiment has improved significantly as the weak Nonfarm Payrolls (NFP) report will strengthen speculation for the Federal Reserve (Fed), reducing interest rates from the September meeting. Generally, slower wage growth and weak labor demand result in poor consumer spending momentum, which indicates that inflationary pressures could ease. This situation would be unfavorable for the US Dollar and bond yields and would likely strengthen the EUR/USD pair, as it would allow the Fed to rollback its restrictive interest rate framework.

The US Dollar was already on the back foot due to weak Q1 Nonfarm productivity growth, and less hawkish guidance on interest rates than feared by the Fed in its monetary policy statement on Wednesday.

Meanwhile, the ISM Services Purchasing Managers Index (PMI) data for April have also missed expectations. Services PMI data, a survey that gauges the performance in the services sector, which accounts for two-thirds of the economy, falls sharply below the 50.0 threshold to 49.4. Investors anticipated to have increased to 52.0 from the prior reading of 51.4. New Business inflows fall sharply to 52.2 from the former release of 54.4. However, Prices Paid rises strongly to 59.2, which reflects stubborn price pressures. The US economic indicator provides fresh cues about the state of the labour market and the health of the services sector, two key elements that the Fed takes into account when deciding on interest rates.

Daily digest market movers: EUR/USD rises as US Dollar weakens

• EUR/USD rallies to a three-week high near 1.0800. The strength in the major currency pair is backed by a weaker-than-expected US NFP report. The NFP report has shown that fresh payrolls were at 175K, significantly lower than the consensus of 243K and the former reading of 315K, upwardly revised from 303K. The Unemployment Rate rose to 3.9%, against the consensus and the prior reading of 3.8%. 
• The Average Hourly Earnings data, which will provide fresh clues about the inflation outlook, softened in April. Monthly wage growth grew at a slower pace of 0.2% from the estimates and the prior reading of 0.3%. In the same period, annual wage growth dipped to 3.9%, against the consensus of 4.0% and March’s reading of 4.1%.
• This will boost expectations for the Fed, reducing rates early. Recently, traders increased their bets in favor of the Fed starting to reduce interest rates in the September meeting. These bets were boosted after Fed Chair Jerome Powell sounded slightly less hawkish than expected in the latest monetary policy statement and the press conference.
• Jerome Powell said that his forecast remained for inflation to fall over the course of the year, but that “my confidence in that is lower than it was.” He also acknowledged that inflation “is still too high,” adding that “further progress in bringing it down is not assured and the path forward is uncertain”, Reuters reported. The Fed also decided to slow down the pace of the balance sheet drawdown, which is another indication that the US central bank leaned toward policy normalization by this year.
• On the Eurozone front, the European Central Bank is widely expected to reduce interest rates in June provided there isn’t any surprise with inflation as price growth in the Eurozone is on course to return to the desired rate of 2%. The expectations for the ECB achieving a “soft landing” have improved as the old continent’s economy expanded by 0.3% in the first quarter of this year, outperforming the consensus of 0.1%.

Technical Analysis: EUR/USD tests the 1.0800 resistance

EUR/USD extends its winning spell for the third trading session on Friday and has kissed three-week high around 1.0800. The near-term appeal of the currency pair has improved as it has broken above the 20-period Exponential Moving Average (EMA), which trades around 1.0720.

On the daily time frame, EUR/USD exhibits a sharp volatility contraction as price action has formed a Symmetrical Triangle formation. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448, and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) shifts into the 40.00-60.00 range, suggesting indecisiveness among market participants.