Today's downside surprise to August nonfarm payrolls suggests U.S. job growth is slowing, which should bolster EUR/USD by solidifying market expectations that the Fed will embark on a more aggressive rate-cut path than the ECB.
Markets have priced in 115bps of Fed easing by the end of 2020 FEDWATCH, which the ECB ECBWATCH would struggle to match with rates already negative. Further support for EUR/USD could come from diminished market expectations for new QE from the ECB as well as the efficacy of upcoming stimulus to weaken the euro .
ECB stimulus has been well telegraphed to investors yet EUR/USD was unable to trade sharply lower.
The market's altered expectations for ECB QE along with recent downbeat U.S. economic data have rallied EUR/USD back above 1.1050, which has resulted in technicals turning bullish.
Monthly and daily RSIs are rising after diverging on the recent low and a monthly bull hammer is forming for September.
Should the latest rally extend and break the trend line off June's high bullish sentiment will grow.
Thursday's ECB meeting is critical.
Should Draghi's expected stimulus package fail to appease euro shorts a large squeeze is likely.
Longs are then likely to target 1.1160/70 and 1.1230/50 resistances.
chart: Click here