Market Data 
- EUR/USD sees rally cut short on a mixture of factors including geopolitical, Fed and German macro data.
- Middle East tensions are pushing up Oil prices, with implications for inflation.
- Fed officials vacillate on timing of first interest-rate cut, German factory data weighs.
EUR/USD is trading back down in the lower 1.0800s on Friday after being rejected by bears at the key 100-day Simple Moving Average (SMA) at 1.0874.
A cocktail of risks appears to be weighing on the pair, including weaker-than-expected German data, geopolitical risks stemming from tensions in the Middle East, and recent commentary from US Federal Reserve (Fed) officials.
The US Nonfarm Payrolls report at 12:30 GMT on Friday is the next major event likely to catalyze volatility for EUR/USD. A higher-than-expected rise in payrolls, estimated to come out at 200,000 in March, would support the US Dollar and vice versa for a miss.
The Average Hourly Earnings component of the Labor Report could also impact the pair if it shows a substantial change in wage inflation. A rise would support USD (pushing down EUR/USD) and the opposite for a fall.
EUR/USD: Pulls back on inflationary risks
EUR/USD is trading down a tenth of a percent at the end of the week after German Industrial Orders data on Friday observed a steep decline at an annual rate of 10.6% in February, compared with a decline of 6.2% in January.
German Factory Order data showed orders rising 0.2% over the same period, missing economists estimates of 0.8%, but recovering from an 11.4% slump reported in January.
Rising Middle East tensions are pushing up the price of Oil, with Brent Crude now trading above $90 per barrel. This is likely to pass through into broader inflation, adding fuel to the thesis of those policymakers who push to keep interest rates elevated.
Commentary from Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari raised the prospect the Fed might not cut interest rates at all in 2024 if inflation remained at current levels.
“If inflation continues to move sideways, it makes me wonder if we should cut rates at all this year,” Kashkari said, despite admitting to previously penciling in two rate cuts this year.
The maintenance of higher interest rates is positive for the US Dollar as it increases foreign capital inflows.
There appears to be more of a consensus amongst rate-setters in the Eurozone about going ahead with a proposed interest-rate cut in June, a factor weighing on the Euro (EUR).
The decision is likely to be dependent on whether wage data released prior to the June meeting shows a decline in wage inflation.
Technical Analysis: EUR/USD ping pongs with no clear direction
EUR/USD rose up to the 100-day SMA at 1.0874 on Thursday before reversing to close flat on the day.
In the process, a Gravestone Doji Japanese candlestick pattern was formed, with potentially bearish implications if followed by a red bearish candlestick on Friday.
EUR/USD Daily Chart
The short-term trend is unclear with risks balanced. The 50-day SMA is providing cushioning support at 1.0827.
A decisive break above the Gravestone Doji candlestick high at 1.0876 would neutralize its bearish implications and solidify the case for a bullish short-term trend and indicate the probability of higher prices. The March 21 high at 1.0942, provides a potential next target.
Alternatively, if the downside continues, a pullback down to support at the previous wave B lows of 1.0798 is also quite possible.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
