EUR/USD forecast: signal after ECB rate cut and US NFP data

The EUR/USD exchange rate jumped to its highest level since November last year after the European Central Bank (ECB) slashed interest rates to aid the ailing economy. It also rose to 1.0853 ahead of the upcoming nonfarm payrolls (NFP) data and as the US dollar index crash accelerated. 

ECB interest rate decision

The latest ECB interest rate decision was the main catalyst for the EUR/USD exchange rate. In it, the bank decided to cut interest rates by 0.25%, bringing the total cuts during the cycle to about 1.75%. It was the sixth interest rate cut the bank has done in this cycle. 

The ECB slashed these rates to support an ailing economy that may worsen when Donald Trump imposes tariffs on the region. In her statement, Christine Lagarde maintained that the bank was vigilant and attentive to the ongoing global developments, including in the automobile sector. 

The ECB decision came as some European countries are committing to more spending, especially in the defense sector. Germany announced it would relax its borrowing structure, a move that pushed its bond yields higher. The government has hinted at spending billions of dollars to boost its defense now that the US government is siding with Russia.

The European economy has been sluggish in the past 12 months, and ECB officials have predicted that it would continue slowing this year. The bank sees it growing by 0.9% this year after growing by 1.2% last year. Also, inflation has moved to 2.4%.

US nonfarm payrolls data

The EUR/USD pair rose ahead of the latest US nonfarm payroll data. Economists polled by Reuters and Bloomberg estimate that the labor market softened in February as business confidence fell and Elon Musk engineered layoffs in the US government. 

The median estimate is that the economy created 153k jobs in February. This figure will likely be worse than expected because of the recent job cuts and the tariff expectations among executives. A similar report by ADP showed that the economy added just 77k jobs in February.

Analysts believe that the labor market will continue to decelerate this year if Trump’s tariffs remain. He is now implementing a 25% tariff on most goods imported from Mexico and Canada.

Companies will react to these tariffs by raising prices and cutting workers, a move intended to maintain their margins.

These jobs numbers come as many analysts anticipate that the Federal Reserve will deliver three interest rate cuts this year. Also, the data come as the US dollar index has crashed in the past few days.

EUR/USD technical analysis

EURUSD chart by TradingView

The daily chart shows that the EUR/USD exchange rate has done well in the past few weeks. It has jumped from a low of 1.0177 in January to 1.0853 this week. It moved above several important resistance levels at 1.0605, its lowest swing on April 16.

The EUR/USD pair has formed a mini golden cross pattern as the 50-day and 100-day moving averages crossed each other. Oscillators like the Relative Strength Index (RSI) and the MACD have continued rising.

The pair has moved above the major S&R level of the Murrey Math Lines tool. Therefore, it will likely keep rising as bulls target the next key level at 1.100. 

However, with the US releasing its NFP numbers on Friday, there is a risk that the pair will retreat and retest the support at  1.0605.