EUR/USD forecast ahead of the September US NFP data

By:
on Oct 3, 2021
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  • The EUR/USD pair declined below a key support level last week.
  • It declined after the latest Eurozone inflation data.
  • The biggest news this week will be the September NFP data.

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The EUR/USD tilted upwards on Friday after the latest Eurozone consumer price index (CPI) data. It rose to a high of 1.1600, which was 0.35% above the lowest level this week. 

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Eurozone consumer inflation

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Consumer prices in the Eurozone jumped in September. According to Eurostat, the headline consumer inflation rose from 3.0% in August to 3.4% in September. The increase was better than the median estimate of 3.3%. On a month-on-month basis, the CPI rose from 0.3% to 0.5%.

At the same time, the so-called core CPI, which excludes the volatile food and energy prices, rose from 1.6% to 1.9%. It rose from 0.4% to 0.5% on a MoM basis. 

Energy was the biggest driver of inflation in Europe in September as natural gas, coal, and oil prices jumped. Prices rose by 17.4% in September after rising by 15.4% in August. 

The inflation number was higher than the target estimate of the European Central Bank (ECB). However, in the past ECB decision, Christine Lagarde, hinted that the bank will be comfortable with inflation above 2% for a while. It expects that prices will normalise in the coming months as the supply chain disruptions ease. 

The EUR/USD also reacted to the latest Eurozone manufacturing PMI data. According to Markit, the bloc’s manufacturing PMI dropped from 61.4 in August to 58.6 in September. Still, the sector is expanding since the PMI was above 50.0. Manufacturers reported strong order books but complained of longer supply times, part shortages, and highers costs. 

US inflation

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The EUR/USD rose after the US published the latest personal consumption expenditure (PCE) data. Data by the Commerce Department showed that the PCE rose from 4.2% in July to 4.3% in August. The core PCE, remained unchanged at 3.6%. PCE is the Fed’s favourite inflation tracker.

The data showed that US consumer inflation remained above the Federal Reserve’s target of 2.0% in the past six straight months. Meanwhile, consumer spending rose by 0.8% in August after falling by 0.1% in the previous month. Consumers accumulated significant savings during the pandemic as they spent more time at home.

The other catalysts moving the EUR/USD are the lingering worry of a US government debt default and the ongoing energy crisis. It will also react to the latest American non-farm payroll (NFP) data scheduled for Friday.

EUR/USD technical analysis

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EUR/USD

The EUR/USD pair declined sharply last week. As it dropped, it moved below the key support at 1.1660, which was the lowest level in August. It is trading at between the 38.2% and 50% Fibonacci retracement levels. 

It has also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level. Therefore, the pair will likely keep dropping as long as it is below the two moving averages.

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