Published on 07.10.2021 09:12

The safe-haven dollar is holding close to a 14-month high against the Euro on as we enter today’s trading session as a surge in energy prices raises concerns that inflation could dampen economic growth which was just starting to pick up after the worst of the covid 19 pandemic.

The US Federal Reserve, which has recently noted that inflationary pressures will prove transitory, has said it is likely to begin reducing its monthly bond purchases before the end of the year which will be followed by an eventual interest rate hike, may now be beginning to rethink their words as the price of energy shows no signs of subsiding.

 The other matter in focus by the US central bank is the current state of the jobs market and the all-important non-farm payrolls report due for release on Friday could provide additional clues to the timing of the Fed's next moves. Analysts are expecting a continued improvement in the labor market, with a prediction of 473,000 jobs that were added to the US economy in September. 

Before tomorrow’s NFP release the initial jobs claim figure, which is also an important indicator regarding the jobs market, is due for release later today and the figure expected is 350k which is an improvement of last month’s reading of 362k. This should create some movement in the EUR/USD currency pair.

Also keeping the Euro under wraps yesterday was the release of retail sales figures from the Eurozone which came in at 0.3%, well short of analyst’s expectations for a number of 0.8% and shows consumers are still cautious about spending as rising energy prices bite and concerns over the coronavirus linger.

From a technical perspective, the EUR/USD managed to get below the support at $1.1574 and is moving towards the next support level which is located near the recent lows at $1.1556. If the currency pair moves below this level, it will likely drop towards the yearly low of $1.1528 which was reached in yesterday’s trading session.

A successful test of the support at $1.1540 will open the way to the test of the next support level at $1.1510. 

To regain any upward momentum, the EUR/USD pair needs to get back above $1.1580 to have a chance to develop upside momentum in the short-term and will probably find stiff resistance at the $1.1623 level.


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