The EUR/USD pair fell sharply below the key psychological support level of 1.1000 in a New York session. This decline was mainly driven by the release of the US Nonfarm Payrolls (NFP) report for September, which showed higher job growth numbers than expected. This positive data strengthened the US Dollar, causing the US Dollar Index to surge above 102.50.
The US NFP report revealed that 254K job seekers were hired last month, surpassing economists’ estimates of 140K. This strong hiring data led traders to reconsider their expectations for a large interest rate cut by the Federal Reserve in November. The Fed had already made a significant 50 bps rate cut in September, and the positive employment numbers have reduced the likelihood of another substantial cut next month.
In addition to the strong job growth numbers, the growth in Average Hourly Earnings also contributed to concerns about inflation remaining persistent. The inflationary risks were heightened as the average wage growth accelerated to 4%, surpassing estimates. This data suggests that price pressures might continue to be a concern moving forward.
The US Dollar saw gains against major currencies, with the strongest performance seen against the Japanese Yen. The USD also performed well against the Euro, Pound, Canadian Dollar, Australian Dollar, New Zealand Dollar, and Swiss Franc. The EUR/USD pair faced continued selling pressure amidst geopolitical tensions in the Middle East, as well as expectations of an ECB interest rate cut in October.
The Euro was also weighed down by ECB board member Isabel Schnabel’s concerns about economic risks in the Eurozone. Schnabel highlighted the challenges to growth and expressed confidence in inflation reaching the bank’s target of 2% in due time. Market expectations for an ECB rate cut have grown due to worsening Eurozone growth prospects and a decline in the Harmonized Index of Consumer Prices below the target.
Technically, the EUR/USD pair has fallen below the 1.1000 level and is trading below the 50-day Exponential Moving Average. The Relative Strength Index has dropped below 40.00, indicating a bearish momentum. A further decline could see the pair moving towards the 200-day EMA at 1.0900, while resistance levels are seen at the 20-day EMA at 1.1090 and the September high at 1.1200.
