EUR/USD bears brace for 1.0490 support with eyes on US NFP

• EUR/USD remains pressured during the risk-off markets, keeps previous day’s pullback from weekly top.
• USD bulls run on full steam as inflation woes renew ahead of US jobs report.
• Economic growth concerns, Russia-Ukraine crisis and ECB’s divergence with Fed keep sellers hopeful.
• One-week-old horizontal support appears the key to further downside.

EUR/USD dribbles in a bearish court as inflation woes play their role ahead of the key US Nonfarm Payrolls (NFP), down 0.14% around 1.0520 heading into Friday’s European session.

That said, the major currency pair dropped the most in a week the previous day after the Bank of England’s (BOE) pessimistic economic forecasts triggered the US dollar’s rally due to its traditional safe-haven appeal. Although the pre-NFP anxiety and recently hawkish comments from the Head of Germany’s IFO institute seem to have challenged the pair bears of late.

"The US interest rate hike leads to an appreciation of the U.S. dollar against the euro, which increases inflationary pressure in Europe," Ifo head Clemens Fuest said, according to an advance copy of the newspaper, published on Friday per Reuters. The news also adds, "In this respect, there is some pressure for the ECB to follow."

Elsewhere, after the Bank of England’s (BOE) double-digit inflation forecast, the Reserve Bank of Australia’s (RBA) quarterly Monetary Policy Statement also propelled inflation fears by drastically raising the expectations for 2022 and 2023 in its latest release. Also highlighting the price pressure are the Tokyo Consumer Price Index (CPI) data from Japan.

It’s worth noting that, economic fears emanating from China’s covid conditions and the Russia-Ukraine crisis also weigh on the market sentiment, as well as the EUR/USD prices.

While portraying the mood, S&P 500 Futures drop back towards the yearly low marked earlier in the week, down 0.10% at the latest, whereas the US 10-year Treasury yields remain around the highest levels since late 2018 marked on Thursday.

Moving forward, EUR/USD traders will pay attention to the Fedspeak and second-tier data from the bloc, as well as risk catalysts for intermediate directions ahead of the US employment report. Forecasts suggest that the US Nonfarm Payrolls (NFP), expected to ease to 391K from 431K, while the Unemployment Rate may also decline to 3.5% from 3.6% in April.

Should the jobs report fail to portray an easing employment crunch, the EUR/USD prices have further south to track.

Also read: US April Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

The EUR/USD pair’s failures to keep the post-Fed rebound beyond the short-term key SMAs join the receding bullish bias of the MACD to favor sellers. That said, the latest weakness aims for an upward sloping trend line from April 28, surrounding 1.0510, ahead of challenging the 1.0490 horizontal support comprising multiple lows marked in the last week.

Meanwhile, recovery moves may initially aim for the 50-SMA and the recent swing high, respectively around 1.0560 and 1.0640. However, EUR/USD bulls will remain cautious until witnessing a clear break of the 100-SMA, close to 1.0690 at the latest.