The decline in the US Dollar seen over the past few weeks has come to a halt. This is partially due to the Federal Reserve upping its hawkish comments, particularly on Thursday. The members of the Federal Open Market Committee particularly voiced their concerns that inflation remains too high.

Also providing further support for the US Dollar is the rise in Oil prices. Crude Oil prices rose back up closer to $100 per barrel, but are again declining this morning. If the price sees more growth, the Dollar can become more expensive. However, investors are turning their attention to the upcoming NFP data for the US.

EURUSD - Investors Turn Their Focus To NFP As The Fed Takes a Hawkish Tone

The EURUSD is particularly interesting as we approach the US NFP data as the US Dollar is the best-performing currency of the day while the Euro is the worst. For the US Dollar, the key drivers in the short to medium term will be today’s US employment data and the Middle East negotiations.

Analysts expect the unemployment rate to remain at 4.3% and the employment change to rise by 73,000. If the Non-Farm Payroll change reads higher than this figure, particularly if again higher than 100,000, the US Dollar can find significant support. A positive NFP release would mean that the Federal Reserve can concentrate on tackling inflation.

Recent comments from Fed officials are also important. Chicago Fed President Austan Goolsbee said businesses are not too concerned about a short-term rise in oil prices after the US-Iran confrontation. However, prolonged high energy prices could create pressure. If they last for several months, businesses may face supply chain disruptions. This could become a broader factor driving inflation higher.

Last night, Fed President, Neel Kashkari, told journalists that inflation remains too high and that if the Strait of Hormuz remains closed, a rate hike may be more likely. The comments are seen as hawkish and are supporting the US Dollar. Mr Kashkari was one of the three FOMC members who dissented from wording that suggested the Fed’s next move was likely to be a cut. In total, there are 12 members who vote on interest rates in the US.

Euro & EURUSD Technical Analysis

In terms of the Euro, the currency has generally been under pressure over the past month due to rising oil and gas prices linked to the Iran conflict. Europe is highly dependent on imported energy, so higher prices hurt growth and business confidence. Additionally, trade uncertainty continues to pressure sentiment as the US threatens tariffs on the EU automobile sector.

Even though the Euro has been one of the struggling currencies of the past month, the EURUSD still trades slightly higher. On the four-hour chart, traders can see the price is forming higher highs and lows. Nonetheless, retracements are of a similar size to the impulse waves, and momentum is not holding in the medium term. Therefore, price action indicates the asset is potentially at risk.

In addition to the above, traders note that the price is trading close to key resistance levels and above the average price of the past 12 months. However, indeed on the five-minute chart the price trades slightly above the 200-bar SMA. If the price falls below 1.17390, sell signals potentially could materialise. However, if the price continues to rise above 1.17565, buy signals become more likely. This price action will largely depend on this afternoon’s employment data.

Key Takeaway Points:

• The US Dollar stabilised as Fed officials maintained a hawkish stance and warned inflation remains too high.
• Fed President Neel Kashkari said inflation remains too high and a prolonged Strait of Hormuz closure could increase the chance of a rate hike, supporting the US Dollar.
• Rising oil prices continue to support the Dollar, while traders closely watch the upcoming US NFP release.
• Analysts expect the unemployment rate to remain at 4.3% and the employment change to rise by 73,000.
• The Euro remains pressured by high energy costs, weaker growth expectations, and US tariff threats on European automobiles.