EUR/USD extends upside above 1.0800 with focus on US NFP

• EUR/USD refreshes a three-week high near 1.0830 due to multiple tailwinds.
• The Euro strengthens as the far right may fail to gain an outright majority in French elections.
• The US Dollar weakens due to multiple tailwinds, with US NFP in focus.

EUR/USD posts a fresh three-week high near 1.0830 in Friday’s European session. The major currency pair strengthens as the Euro’s outlook improves ahead of the second round of French elections, scheduled for Sunday, and sheer weakness in the US Dollar (USD).

The appeal for the Euro improves amid expectations that the Marine Le Pen-led far-right National Rally would fail to convert its victory of the first round into an absolute majority due to the tactical withdrawal of at least 200 candidates from Sunday’s legislative elections by a coalition of French President Emmanuel Macron-led entrist alliance and the left-wing.

On the monetary policy front, speculation for the European Central Bank (ECB) delivering subsequent rate cuts on July 18 has diminished as disinflation in the Eurozone appears to be stalling. The preliminary core Harmonized Index of Consumer Prices (HICP) that excludes volatile items grew steadily by 2.9% year-on-year in June. 

Meanwhile, the Eurozone Retail Sales data has turned out mixed in May. Annually, Retail Sales expanded strongly by 0.3%, while economists expected spending at retail stores to have barely increased. On monthly, Retail Sales expanded by 0.1% after contracting 0.2% in April but missed expectations of 0.2% growth.

Daily digest market movers: EUR/USD strengthens as US Dollar shifts into bearish trajectory

• EUR/USD trades comfortably above the round level of 1.0800 at the cost of the US Dollar. Growing speculation that the Federal Reserve (Fed) will start reducing interest rates from the September meeting has built significant pressure on the Greenback. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has extended its losing spell for the seventh trading session and has posted a fresh three-week low near 105.00.
• Traders raised rate-cut bets for September heavily due to various factors, such as Fed Chair Jerome Powell’s sheer confidence that the central bank has made considerable progress in inflation, easing labor market strength, and contraction in the Services PMI. 
• The June ADP Employment Change report showed unexpectedly slowing private sector hiring. In the same period, the Services PMI showed a contraction in the sector and dropped to its lowest level in four years.
• In Friday’s session, the major trigger for the US Dollar will be the United States Nonfarm Payrolls (NFP) data for June, which will be published at 12:30 GMT. The US NFP report is expected to show that 190K new workers were hired, compared to 272K in May. The Unemployment Rate is expected to remain steady at 4.0%.
• Investors will pay close attention to Average Hourly Earnings data, a measure of wage growth that has been a major driving factor behind high inflation in the service sector. Annual Average Hourly Earnings are estimated to have decelerated to 3.9% from May’s reading of 4.1%. On monthly, the wage growth measure is expected to have grown at a slower pace of 0.3% from the prior release of 0.4%.

Technical Analysis: EUR/USD stabilizes above 1.0800

EUR/USD extends its winning spell for the seventh day on Friday. The major currency pair strengthens after stabilizing above the 20-day and 50-day Exponential Moving Averages (EMAs), which trade around 1.0750 and 1.0770, respectively. The overall trend of the shared currency pair has also strengthened as it has jumped above the 200-day EMA, which trades around 1.0800.

The Symmetrical Triangle formation on the daily timeframe exhibits a sharp volatility contraction, which indicates low volume and narrow ticks.

The 14-day Relative Strength Index (RSI) reaches 60.00. Should the bullish momentum be triggered if it breaks above this level?