EUR/USD drops to a new weekly low (0.9730) as it stays under pressure after the Federal Reserve interest rate decision, and the US Non-Farm Payrolls (NFP) report may increase the recent weakness in the exchange rate as the update is anticipated to show a further improvement in the labor market.
EUR/USD trades back below the 50-Day SMA (0.9873) after failing to test the September high (1.0198), and the exchange rate may struggle to retain the advance from the yearly low (0.9536) as it appears to be tracking the negative slope in the moving average.
At the same time, the NFP report may drag on EUR/USD as the US economy is expected to add 200K jobs in October, and signs of a resilient labor market may provide the Federal Open Market Committee (FOMC) with greater scope to pursue a highly restrictive policy as Chairman Jerome Powell emphasizes that “it is very premature” to pause the hiking-cycle.
Therefore, the FOMC may retain its existing approach to attain price stability as Chairman Powell acknowledges that “we haven’t seen inflation coming down,” and it remains to be seen if Fed officials will project a steeper path for US interest rates as the central bank is slated to release the updated Summary of Economic Projections (SEP) at the next rate decision on December 14.
Until then, EUR/USD may face headwinds as the European Central Bank (ECB) indicates little interest in pursuing a restrictive policy, while the tilt in retail sentiment seems poised to persist as traders have been net-long the pair for most of the year.