EUR/USD forecast ahead of NFP data, France PM confidence vote

The EUR/USD exchange rate wavered today, September 4, as investors reflected on the ongoing political crisis in France and the upcoming US non-farm payrolls (NFP) data. It was trading at 1.1655 on Thursday morning, up from last month's low of 1.1390.

US labor market has softened 

The EUR/USD exchange rate remained on edge on Thursday as focus among investors remained on the labor market.

A report by the Bureau of Labor Statistics released on Wednesday showed that the number of job vacancies retreated to the lowest level in months, a sign that the labor market was softening. The US had 3.2 million job vacancies in July, the lowest number in years.

Most market participants believe that the upcoming non-farm payrolls data will send a signal that the labor market was still under pressure in August, as tariffs on imports pushed more companies to have a cautious outlook on their job additions.

Donald Trump has confirmed tariffs on most countries this year. For example, goods from India are now being charged a 50% tariff, with a 25% for doing business with China. Chinese goods are being charged a 30% tariff, while a recent deal with the European Union settled on a 15% levy.

US non-farm payrolls data ahead

The most recent results showed that the economy added 73,000 jobs in Jul, with the unemployment rate rising to 4.3% during the month. Analysts don't see a major improvement, with the average estimate being that the economy added 75,000 jobs in August as the unemployment rate to 4.3%.

Economists expect the data to show that the average hourly earnings softened to 3.7% in August from 3.9% in the previous month. Another set of weak jobs numbers will boost the view that the Federal Reserve will start cutting interest rates. In a statement, Christopher Waller, a Fed governor said:

The EUR/USD exchange rate is also reacting to the ongoing political crisis in France, where the president is facing a vote of no confidence, putting the country at risk. In a statement, Prime Minister Francois Bayrou said that the recent talks between parties about saving his job were not likely to succeed.

EUR/USD technical analysis 

The EUR/USD exchange rate remained in a tight range on Thursday morning as traders waited for the upcoming non-farm payrolls data. It has moved slightly above the 50-day Exponential Moving Average (EMA).

Most importantly, the pair has formed an inverse head and shoulders pattern whose neckline is the slanted trendline. 

A H&S pattern is one of the most common bullish reversal patterns in technical analysis.

Therefore, the most likely scenario is where the price stages a strong breakout as investors focus on the year-to-date high of 1.1830, the highest swing in June this year.