EUR/USD Price Climbs Back Above Mid 1.0500s Amid Subdued USD Demand, Focus Shifts To NFP

• EUR/USD cross witnessed some buying during the mid-Asian session and rebounded from the daily low
• Fed Chair's decision to walk back some of his previous day's 50bps signal triggered the U.S. treasury bond yields to move lower
• Hawkish ECB president comments followed by stronger-than-expected Germany Industrial Production data underpin the Euro
• Investor's attention shifts to Friday's key job data, seen lower at 205K

EUR/USD pair came under renewed buying pressure on Thursday after attracting bullish bets during the second part of the Asian session to lift off spot prices from the vicinity of the 1.05405 level/daily low. When speaking, the pair is up over 3 pips for the day and has managed to recover part of its early lost ground. The shared currency looks set to maintain its offered tone going forward to the European session.

Retreating treasury bond yields amid the Fed chair's decision to walk back some of the previous day's 50bps signal on the second day of his Congressional Testimony forced the U.S. dollar to trim part of its intraday gains and, in turn, offered some support to the EUR/USD pair.

The U.S. Dollar index (DXY), which measures the value of the United States dollar relative to a basket of foreign currencies, was down 0.22% for the week to trade at $105.625 after hitting a three-month month high on Tuesday after Federal Reserve Chair Jerome Powell said the U.S. central bank is likely to raise rates more than previously expected and warned that the process of getting inflation back to 2% has "a long way to go." On the second day of his Testimony before the Joint Economic Committee in Washington DC, Fed Chair Jerome Powell offered no major surprises and walked away from his previous day's 50bps signal. He, however, reaffirmed his message of higher and potentially faster interest rate hikes but emphasized that debate was still underway, with a decision hinging on data to be issued before the U.S. central bank's policy meeting in two weeks.

On the economic data front, an ADP National Employment report on Wednesday showed Private businesses in the U.S. unexpectedly created 242K jobs in February of 2023, well above an upwardly revised 119K in January and market forecasts of 200K. The upbeat data fueled market expectations that the fed would stick to high-interest rates. Fed funds futures traders are now pricing in a 76.4% probability, up from 73.5% the previous day, that the Fed will hike rates by 50 basis points, lifting the overall Target Rate to 5.25% in the next monetary policy meeting slated for the 22nd March.

In other news, a U.S. Bureau of Labor Statistics report on Tuesday showed the number of job openings in the United States fell by 410,000 to 10.824 million in January 2023 from an upwardly revised 11.234 million in December, compared to market expectations of a 10.5 million decrease.

Elsewhere, a U.S. Bureau of Economic Analysis report on Wednesday showed the U.S. trade deficit had increased slightly to a three-month high of $68.3 billion in January of 2023 from a downwardly revised $67.2 billion in December, compared to market forecasts of a $68.9 billion gap. Shifting to the Eurozone docket, the single currency was supported by stronger-than-expected Germany Industrial Production data last month. Industrial production in Germany advanced 3.5% month-over-month in January 2023, recovering from a downwardly revised 2.4% drop in December and well above market expectations of a 1.4% rise and marking the sharpest growth since June 2020, according to a report by Destatis. 

Retail Sales, however, in the eurozone's largest economy fell 0.3% in the same month, an improvement from the 5.3% slump in December and below market expectations of a 2% increase. Despite the downbeat Germany Retail sales data, the Euro continued to be supported by increased bets that the European Central Bank (ECB) will stick to aggressive rates to tame inflation. In turn, this should limit any further downside move for the Euro. In fact, on Monday, top ECB policymakers delivered hawkish speeches, with Robert Holzmann calling for further 50bps hikes. Additionally, hawkish comments by ECB President during an interview with Group Vocento were also seen as a key factor in offering support to the Euro. "It is very likely that we will raise interest rates by 50 basis points. This was a decision that was indicated at our last monetary policy meeting and all the numbers we have been seeing in recent days are confirming that this interest rate hike is very, very likely," Largade said when asked if she would lift interest rate by another 50bps at March's monetary policy meeting.

As we advance, investors look forward to the U.S. docket featuring the release of the U.S. Initial Jobless Claims data seen higher at 195K, up from 190K the previous week. However, the main focus remains on tomorrow's Nonfarm Payrolls data for February, which is lower at 205K, down from 517K in January.

Technical Outlook: Four-Hours EUR/USD Price Chart

From a technical standstill using a four-hour price chart, the price has extended the modest rebound from the vicinity of 1.05232 level after a firm rejection from the key support level plotted by a descending trendline extending from the late February 2023 swings low. Some follow-through buying would face resistance at the 20 (blue) and 50 (red) Exponential Moving Averages (EMA) at 1.05822 and 1.06053 levels, respectively. If the price pierces above these barriers, the bullish uptick will face additional resistance at the 50% and 61.8% Fibonacci Retracement levels at 1.06082 and 1.06301, respectively. A convincing break above these levels would stage further upside moves. Still, it must break above the technically strong 200 (yellow) Exponential Moving Average (EMA) at the 1.06659 level to invalidate the bearish bias.

The bearish bias is supported by acceptance of the price below the 200 (yellow) Exponential Moving Average (EMA) at the 1.06659 level. Furthermore, the technical Oscillators are holding bearish dip territory, pointing to a bearish sign for price action this week. Additionally, the 20 (blue) and 50 (red) Exponential Moving Averages (EMA) crossover at 1.06293 adds credence to the bearish bias.

If dip-sellers and tactical traders jump in and trigger a bearish reversal price will first find support at the key support level by a descending trendline extending from the late February 2023 swing low. If sellers manage to breach, this downward floor trajectory could accelerate toward the 1.04817 key support level.