EUR/USD consolidates gains ahead of Eurozone GDP, employment figures

EUR/USD is posting marginal gains on Friday, trading near 1.1650 at the time of writing, after being rejected at 1.1675during the early European session. Downside attempts, however, remain limited so far, with markets bracing for a quarter-point interest rate cut by the Federal Reserve next week.

Economic data released on Thursday revealed that US initial Jobless Claims declined unexpectedly in the last week of November, although the figures might have been distorted by the Thanksgiving holidays.

Beyond that, US Challenger Job Cuts declined by 53% in November, to 71,321 from 153,074 in October, although the report also showed that hiring plans remained stalled amid the uncertain economic context.

In the Eurozone calendar, the third estimation of the Q3 Gross Domestic Product (GDP) and the Employment Change of the same period will attract attention during the European session, although the main focus will be on September’s delayed US Personal Consumption Expenditures (PCE) Price Index, the last inflation gauge ahead of next week’s Fed monetary policy meeting.

Daily Digest Market Movers: US Dollar remains on the defensive amid Fed cutting hopes

• The US Dollar remains the worst performer of the G8 currencies this week. The downbeat ADP Employment Change report seen earlier this week has cemented hopes that the Fed will cut rates next week, while in Europe, manufacturing activity data beat expectations, providing additional support to the Euro.
• On Thursday, Eurozone Retail Sales disappointed with a 0% growth in October, undershooting market expectations of a 0.1% growth. September’s data was revised up to a 0.1% rise from the previously estimated 0.1% decline. The Euro pulled back after the release to pick up shortly afterwards.
• US Initial Jobless Claims dropped to 191,000 in the last week of November, their lowest level in three years, from 218,00 in the previous week. The market took these figures with caution, as job seekers might have left their unemployment claims on hold during the Thanksgiving holidays.
• Futures markets are pricing in an 87% chance of a 25 basis points Fed interest rate cut at their December 10 meeting, and between two and three more cuts next year, according to the CME Group’s Fedwatch Tool.
• News about the possibility of White House economic adviser Kevin Hassett replacing Jerome Powell as the next Fed chairman is also weighing on the US Dollar. The Financial Times has reported that Bond investors have complained to the US Treasury, concerned that Hassett might carry on an aggressive easing cycle.
• In the Eurozone, the focus on Friday is on the Q3 GDP latest estimate, which is expected to confirm that the economy grew 0.2% QoQ and 1.4% YoY from the same period last year, from 0.1% and 1.5% respectively in Q2.
• The Eurozone Employment Change, also out this Friday, is seen growing 0.1% in the quarter and 0.5% year-on-year, unchanged from the previous month.
• Later on the day, the US PCE Price Index is expected to confirm that inflation remains sticky, with the headline reading accelerating to a 2.8% year-on-year reading, from 2.7% in August, and the core reading growing at a steady 2.9% yearly pace.

Technical Analysis: EUR/USD bulls remain capped below 1.1680

EUR/USD maintains its immediate bullish trend intact, with downside attempts contained above trendline support, now at 1.1630, while the 1.1670-1.1680 area keeps holding bulls. The 4-hour Relative Strength Index (RSI) remains steady above the 50 level, currently at 61, although the Moving Average Convergence Divergence (MACD) indicator has pulled back below the zero level, indicating that the bullish trend is losing steam.

Bulls need to breach Thursday’s high at 1.1682 to extend their rally towards the October 17 high, near 1.1730, ahead of the October 1 high, at 1.1778.

A bearish reaction below the mentioned 1.1630 level, on the contrary, might lure bears to retest the weekly lows at 1.1595. Further down, the November 26 and 28 lows in the 1.1550-1.1555 area emerge as the next targets.