The EUR/USD exchange rate pulled back on Friday after the US published strong non-farm payrolls (NFP) data and as geopolitical risks rose. It dropped to 1.1522, down from the year-to-date high of 1.2090.
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US Non-Farm Payrolls Data Undermines Fed Cuts Outlook
The EUR/USD pair retreated after the Bureau of Labor Statistics (BLS) released a stronger-than-expected jobs report, which jolted the Federal Reserve's outlook.
Data released on Friday showed that the economy created 178k jobs in March this year, better than the median estimate of 60k. The report was also better than the previous month's 133k job losses.
The report showed that the unemployment rate retreated to 4.3% from the previous month's 4.4%. This improvement was mostly because of the healthcare sector, which benefited from the return of thousands of people at Kaiser Permanente.
Also, the increase happened because of the ongoing hiring related to the upcoming World Cup in the US. As such, economists believe that the labor market is still under intense pressure this year.
The EUR/USD pair also retreated as geopolitical risks in the Middle East rose, which helped to push crude oil prices higher. The West Texas Intermediate jumped to $112, while Brent moved to $110. These numbers mean that US inflation will continue rising in the coming months, which may make it difficult for the Federal Reserve to cut interest rates.
Looking ahead, the EUR/USD pair will react to the upcoming macro data from the United States, including the ISM non-manufacturing PMI data. The US will also release the latest GDP and PCE Inflation report on Friday this week.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has remained in a tight range in the past few weeks. It has now retreated below the 50-day and 200-day Exponential Moving Averages (EMA) and are about to form a death cross pattern.
Also, the pair has formed a bearish flag pattern, which is made up of a vertical line and an ascending channel pattern. It has already retested the lower side, confirming a break-and-retest pattern.
The pair remains below the Supertrend indicator, a sign that bears remain in control. Also, the Relative Strength Index (RSI) has remained below the neutral point at 50 and is pointing downwards.
Therefore, the most likely scenario is where the pair retreats, potentially to the key support level at 1.1412, its lowest level in March.
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