Title: EUR/USD rebounds from around 0.9800 as risk-off profile hits, US NFP buzz

October 7, 2022 12:01 AM ET

By: AnalysisWatch

The EUR/USD pair has broken the consolidation formed in a narrow range of 0.9786-0.9802 to the upside in the Tokyo session. The asset has received offers below the round buffer of 0.9800 and shows signs of recovery as the US dollar index (DXY) lost its upward momentum. The DXY came under selling pressure and fell to near 112.00.

Meanwhile, the risk-off impulse has subsided, and the S&P500 is gaining ground, while 10-year US Treasury bond yields have fallen to nearly 3.82%.

It would be difficult to see a reversal of the current pattern, as the rally is merely a pullback and volatility is expected to be strong ahead of the U.S. Nonfarm Payrolls (NFP) data. Preliminary estimates are that the US NFP numbers will fall to around 250k, down from 315k previously. Recently released US employment data from Automatic Data Processing (ADP) reported job growth of 208k. This suggests that the NRP catalyst may be below projections.

A decline in employment numbers is highly expected as the Federal Reserve (Fed) continues to tighten its measures to curb runaway inflation. This has forced companies to postpone their expansion plans to escape higher interest rate commitments.

In the euro zone, weaker retail sales data will be a little slower in coming. The retail sales data is weighed down with inflationary pressures but still fell 2%, compared to forecasts of a 1.7% decline and the previous release of 0.9%.