Will Payrolls Lead To Further Losses In EUR/USD And GBP/USD?

Dear Traders,

The ECB’s policy decision came as a surprise for many market participants as policymakers decided to change their guidance by dropping a pledge to increase QE if needed. This tiny step to policy normalization shows confidence in the durability of euro-area growth. The euro initially rose on that hawkish bias but it was ECB President Draghi’s comments at the press conference that send the euro tumbling.

For euro bulls it should have been no surprise that the euro sharply reversed after another test of 1.2450 failed to provide a breakout. Rather, bearish momentum accelerated after the euro dropped below 1.2380 for a second time with the focus now turning to the 1.2280-support level.

The reason for the euro’s decline was that Mario Draghi gave a rather dovish speech saying that he sees interest rates at their present levels well beyond the end of QE. This dovish tone was all traders needed to sell euros toward lower levels.

The British pound was hurt by news from U.K. officials saying that they see “no Brexit deal until next year”. The pound fell toward a low of 1.3780 and currently struggles to hold above 1.38. If it falls below 1.3750 we will focus on lower targets at 1.3710 and 1.3610. A current resistance is however seen at 1.3890.

From the U.K. we have Manufacturing Production figures scheduled for release at 9:30 UTC but this report should take a backseat to the U.S. Nonfarm-payrolls report due at 13:30 UTC, which will receive more attention.

Heading into today’s NFP release, current expectations for the data are modest, with the unemployment rate expected to drop to 4.0 percent and the headline jobs figure to come in at 205K. The focus will also be on average hourly earnings.

Have a nice weekend.

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