EUR/USD Forecast: Bullish Momentum Loses Ground Ahead of NFP Release

The EUR/USD has dropped nearly 1% from yesterday’s high of 1.04427. This decline is primarily due to the market adopting a defensive stance in favor of the U.S. dollar ahead of the upcoming Non-Farm Payrolls (NFP) report in the United States. Currently, the chart shows significant indecision, and the employment data could trigger a clearer directional move in the short term.

The Big Day is Approaching

The Non-Farm Payrolls (NFP) report will be released tomorrow, with an initial forecast of 170,000 new jobs, which is lower than the previous 256,000 figure.

This decline in expected job creation is due to several factors. First, the 2024 holiday season has ended, and with it, the temporary hiring surge in the consumer and services sectors, reducing the demand for new jobs. Additionally, since the start of 2025, some restrictive monetary policies in the U.S. have kept the interest rate at 4.5%, which, over time, tends to limit economic growth and job creation.

NFP February 2025

Source: Data - FXStreet

It is essential to consider that in the last two NFP releases (December and January), the labor market showed upward momentum, with 227,000 new jobs reported in December and 256,000 in January. If tomorrow’s report surpasses the expected 170,000 jobs, it could be interpreted as a positive sign for the U.S. labor market, reinforcing the idea that the Federal Reserve will maintain its interest rate at 4.5% without changes in the short term.

NFP Trend

Source: ForexFactory

A stronger-than-expected job report (and two months of past strong data) could challenge expectations of an inflation slowdown, prompting the Fed to maintain its restrictive stance. This, in turn, could strengthen the U.S. dollar, as U.S. Treasury bonds would continue offering higher yields compared to European bonds. Currently, the ECB’s interest rate stands at 2.9%, making U.S. assets more attractive to investors seeking higher returns, hence increasing demand for the U.S. dollar as long as this trend continues.

If the U.S. labor market continues to post strong numbers, bullish pressure on the U.S. dollar could become more relevant in the short term, limiting any EUR/USD recovery attempts.

EUR/USD Technical Forecast

Recent EUR/USD volatility has been largely driven by uncertainty sparked earlier this week, when the White House announced new trade tariffs. However, after this event, the price has entered a sideways consolidation phase.

Source: StoneX, Tradingview

• Breakout of the Bearish Channel: On January 20, the euro's strong bullish momentum broke the bearish structure that had been in place since October 2024. Since then, the pair has been trading within a sideways range, with resistance at 1.04870 and support at 1.02666. So far, the lack of significant price movements suggests that this pattern could persist in the coming sessions.

   

• ADX: The ADX indicator supports this view, as its line hovers around the neutral 20 level, indicating low directional strength. As long as the ADX remains at these levels, the sideways range could extend in the short term while the market digests the new employment data set to be released tomorrow.

   

  Key Levels:

   

• 1.04870 (Key Resistance): The upper boundary of the sideways channel, aligned with the 50-period simple moving average. A bullish breakout above this level could trigger further buying and extend the uptrend.

   

• 1.03733 (Neutral Zone): Represents the midpoint of the current range. As long as the price remains around this level, neutral market conditions are likely to persist.

   

• 1.02666 (Key Support): The lower boundary of the sideways range. A break below this level could intensify selling pressure, potentially leading to a stronger bearish trend in EUR/USD.

Written by Julian Pineda, CFA – Market Analyst