The EUR/USD pair edged lower, falling beneath 1.0400, as investors turned cautious ahead of the U.S. Non-Farm Payrolls (NFP) report. The dollar gained strength amid speculation that a strong labor market could reinforce the Federal Reserve’s hawkish stance, further pressuring the euro.
Market sentiment remains tense, with traders weighing the potential impact of a resilient U.S. job market on future interest rate hikes. A robust NFP print could fuel expectations of prolonged monetary tightening, reinforcing demand for the greenback. Conversely, a weaker-than-expected report may ease pressure on the Fed, offering some relief to the struggling euro.
The euro has faced persistent headwinds amid concerns over slowing economic growth in the eurozone. Inflation remains elevated, but softening consumer demand and a cautious European Central Bank (ECB) have limited the currency’s upside. Meanwhile, geopolitical uncertainties and recession risks continue to dampen investor confidence in the bloc’s economic outlook.
Bond markets are also reflecting cautious positioning, with U.S. Treasury yields holding firm as investors brace for the data. Higher yields have supported dollar strength, making it difficult for the euro to stage a meaningful rebound. Eurozone yields, in contrast, remain subdued as the ECB signals a more measured approach to rate adjustments.
Technical analysts point to 1.0350 as the next key support level for EUR/USD, with a break below potentially opening the door to further downside. On the upside, resistance is seen near 1.0450, where selling pressure could re-emerge if the dollar rally stalls.
As traders await the NFP report, market volatility is expected to remain elevated. A sharp deviation from expectations could trigger significant price swings, influencing broader risk sentiment and central bank policy expectations in the coming weeks.
