Eur/usd drops amid rising US labor costs and mixed Euro area data

EURUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.12%	-12.8 Pips
Week to-date	1.32%	135.5 Pips
February	-0.13%	-14 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD Nonfarm Payroll Employment

What happened lately

In the United States, there have been notable movements in economic indicators. The U.S. Unit Labor Costs saw a significant increase in the fourth quarter, rising to 3% from 0.8% in the previous quarter, according to the Bureau of Labor Statistics. This suggests an increase in the cost pressures faced by employers. Additionally, the U.S. Initial Unemployment Insurance Claims increased in the week ending February 1st to 219,000, up from the revised figure of 208,000. This rise in claims reflects a slight weakening in the labor market. Furthermore, the Nonfarm Business Labor Productivity in the U.S. fell in the fourth quarter, decreasing to 1.2% from 2.2% in the third quarter, indicating a decline in efficiency and output per labor hour.

In the Euro Area, retail trade turnover in December showed a mixed performance. The monthly turnover decreased to -0.2% from 0.1% in November, signaling a contraction. However, on an annual basis, retail turnover increased to 1.9% from 1.2% in November, showing a year-over-year improvement according to Eurostat. On the manufacturing front, Germany experienced turbulence, with new orders in manufacturing showing positive recovery, rising to 6.9% in December from -5.4% in November when adjusted for seasonal variations. Nevertheless, non-seasonally adjusted figures were concerning, with a drop to -6.3% from -1.7% in the previous month. Additionally, the Euro Area’s Producer Price Index (PPI) reflected slight inflationary pressures, with the index rising to 0%, up from -1.2% on a yearly basis in December. The month saw a decrease in the PPI to 0.4% from the revised November figure of 1.7%.

The EURUSD exchange rate, which dropped by 0.12% to 1.03833, is likely affected by these economic revelations. The increase in U.S. labor costs despite rising unemployment claims may put the dollar in a resilient position amidst inflation worries. Conversely, mixed signals from the Euro Area, with retail and production indices fluctuating, may contribute to the Euro’s weakening. The combination of these factors presents a scenario where the dollar could strengthen against the Euro, especially in light of labor cost hikes and looming U.S. nonfarm payroll data, further pressuring the EURUSD pair downward.

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What can we expect from EURUSD today?

EURUSD on Thursday dropped -0.12% to 1.03833. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for EURUSD looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at S1 1.03551 with break below could see further selling pressure towards S2 at 1.0327. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.04054 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.03521 would indicate selling pressure.

For the week to-date, take note that EURUSD is mixed as compared to the prior week.

Key levels to watch out:

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