The recent Non-Farm Payrolls (NFP) data release has provided fresh insights into the U.S. job market, showing a robust addition of 206,000 jobs in June, surpassing expectations of 191,000 and previous figures of 218,000.

Despite this positive job growth, the unemployment rate rose slightly to 4.1%, up from the anticipated 4.0%. Additionally, Average Hourly Earnings remained stable month-over-month at 0.3%, matching the previous rate but below the expected 0.4%.

While the addition of 206,000 jobs in June surpasses expectations, an increase in the unemployment rate to 4.1% suggests underlying complexities. This duality raises questions about the true strength of the labor market, despite the positive job growth figures.

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— Angela Webb (@AWebb34112) July 5, 2024

This mix of strong job creation coupled with stagnant wage growth and a slight increase in unemployment has led to nuanced implications for the U.S. dollar and subsequently, the EUR/USD exchange rate.

Weakening USD and EUR/USD Technical Outlook

In response to the NFP report and ongoing economic data, the U.S. dollar has continued its downward trend, reaching a three-week low.

This decline is mainly due to mixed signals about the labour market’s strength and persistent expectations of Federal Reserve rate cuts. The weaker dollar has consequently bolstered the EUR/USD pair, pushing it to new three-week highs around the 1.0830 level.

From a technical perspective, the EUR/USD shows strong bullish signals. The currency pair’s pivot point at $1.0816 provides a base for potential upward movement. Immediate resistance is found at $1.0839, with further resistance at $1.0854 and $1.0872.

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Should the pair break above these barriers, it could signal continued bullish momentum. Conversely, support levels are identified at $1.0795, $1.0779, and $1.0763, offering potential entry points for traders during pullbacks.

The Relative Strength Index (RSI) at 73 indicates nearing overbought conditions, suggesting a possible brief consolidation or correction before further gains.

The 50-day Exponential Moving Average (EMA) at $1.0769 continues to act as dynamic support, underpinning the bullish outlook for the EUR/USD as long as prices remain above this level.

Economic Outlook and Market Sentiment

The EUR/USD pair’s trajectory remains influenced by broader economic trends and market sentiment. With the Federal Reserve’s potential policy adjustments on the horizon and the European Central Bank’s (ECB) cautious stance on rate cuts, investors are closely monitoring developments.

The stability of the Euro against a backdrop of political certainty in Europe, particularly in France, and mixed economic indicators from the U.S., are key factors driving the current forex market dynamics.

Investors and traders should watch for fluctuations in market sentiment and upcoming economic data releases, which may provide further direction for the EUR/USD pair.

The complex interplay of robust job additions, stable wage growth, and slight unemployment increases in the U.S. will continue to shape currency market movements in the near term.