Let me narrate an event that happened recently and has severely shaken up the financial world: out of the blue, the value of the U.S. dollar dropped drastically due to some surprising news regarding jobs in the country. Just like when you expect an A from a test but get a C, which is really unexpected and a bit of a disappointment!
A Jobs Report shocked everyone believed that this July, numerous more people would find jobs—exactly 175,000. When all was said and done, however, the numbers of new jobs added came out to only 114,000. This would be as if one had planned for a grand party but then had fewer guests attend than initially expected.
In addition, the rate for unemployment, which shows how many people don't have jobs, rose a little at 4.3%, instead of remaining at 4.1% as people hoped. People have begun to think that maybe, just maybe, the Federal Reserve, the boss of this country's bank, might lower interest rates to help the economy.
Important Market Turmoil
Most believed the Federal Reserve wouldn't do much before the jobs report. However, after the shocking lack of job numbers came out, people started to think maybe there is a 71% chance rates could be cut big. This perception implied that the dollar became lowly valued. Think of it like a seesaw where one side suddenly collapses because of an unforeseen force. All the while, the euro, was getting stronger, and the dollar also dropped against the yen, the Japanese money.
What's Happening with Jobs? Now, economists are noticing that not every part of the job market is doing very well. A good example is the lack of growth in manufacturing and construction jobs. However, there is some other good news, which is that more people are getting jobs in healthcare or hospitality, including restaurants and hotels. The unemployment rate rose to 3.6%, but not much change happened in the number of persons seeking employment, which stands at a rate of 62.6%. This implies that gaining employment remains a headache for many people.
EUR/USD Technical Analysis
Now everyone is looking at the Federal Reserve for the next move. If the job situation does not improve, they just might cut interest rates in order to make borrowing money cheaper and encourage spending.
This may weaken the dollar and boost other currencies, such as the euro. If you follow numbers, investors are watching the EUR/USD pair, which expresses the euro versus the dollar. They'll be monitoring certain levels like 1.0810 and 1.0820 to find out if the euro gets strong.
It's been a tough time lately for the EUR/USD currency pair.
It currently tries to break through the resistance area between 1.0810 and 1.0820, where the descending trend line meets the 200-day Simple Moving Average. So, in a way, this is like a wall that the euro must climb over. Were the euro to make the passage over that level and stick, the test would be at 1.0850—where the 20-day SMA stands. From there, next support could be at the 1.0880 figure since such is the 23.6% retracement according to the last uptrend based on the Fibonacci sequence.
The first support level that the euro might test is 1.0780, the Fibonacci 61.8% retracement level, if it struggles and begins to slip. Deeper are the levels of 1.0740 (Fibonacci 78.6% retracement) and psychological static support at 1.0700. Geopolitical Tensions: Into the Equation
Add in some geopolitical tensions, perhaps in the Middle East, or shifts in Japan's monetary policy, and the yen strengthens even more as people look at it as a safe haven for their funds. Japan has also increased its interest rates, which only makes things much more complex with what is happening with different monies around the world.
Investors Await Fed Decision
Now, everyone is waiting to see what the Federal Reserve will decide. It is understood that a big rate cut could mess up the way people invest in stocks, bonds, and so on. So the coming months are really going to go a long way toward deciding just what goes down with the world economy. Traders and policymakers try to understand what goes on amidst this ever-changing environment, realigning the data of jobs, currency value changes, and monetary policy with each other to make the best moves.
Ultimately, it was this latest jobs report that lit the fire and caused so much rethinking in the outlook for the dollar and what to expect next from the Federal Reserve. I think, as an individual, this is the most exciting part, watching how these elements play out together for the future.
My Opinion
From my perspective, the EUR/USD currency pair is at one very important point. The current level gives an adequate amount of resistance, so any breach of the level indicates a move to the upside. But if it fails at the present resistances around 1.0810 and 1.0820, then the chances are for pullback towards the previous support of 1.0780 levels.
I think these are very, very important weeks now coming up for the Fed. This period is such a thrilling one because we stand to watch technical and fundamental elements come together to impact this currency pair's future.