EUR/USD slips on robust US labor data, weaker EU’s Q2 GDP

• EUR/USD trades at 1.0707, down 0.19%, as US jobless claims of 216K outperform the expected 229K, fueling a Fed rate hike speculation.
• Eurozone Q2 GDP grows a meager 0.1%, missing market expectations of 0.3%, raising concerns of a potential economic contraction.
• Despite high inflation, traders expect the ECB to maintain rates, though a hawkish statement from Lagarde is anticipated.

The Euro (EUR) caps its fall against the Greenback (USD) but remains trading with losses of 0.19% after data from the Eurozone shows the bloc grew at a marginal pace. Contrarily, the United States (US) labor market remains robust, as demonstrated by data. The EUR/USD is trading at 1.0700 after hitting a daily high of 1.0731.

Euro struggles against a resilient US Dollar as Eurozone GDP disappoints and US jobless claims beat expectations

Data revealed from the US Burea of Labor Statistics (BLS) showed the jobs market remains resilient amidst 525 basis points of tightening by the Fed, as Initial Jobless Claims for the last week printed 216K new fillings for unemployment, well below the 229K foreseen by analysts. This data spurred a repricing of further tightening by the US Federal Reserve, with chances for a 25 bps hike in November ticking up to 43%. Regarding September’s meeting, money market futures have priced in the Fed would stay put.

Consequently, the EUR/USD pair edged lower and hit a low of 1.0688. Since then, the pair has recovered territory and the 1.0700 figure, sponsored by US Treasury bond yields, registering modest losses. At the same time, the Greenback lost some ground, as the US Dollar Index (DXY) fell below the 105.000 mark but clung to gains of 0.11%.

Earlier in the European session, Eurostat revealed the Gross Domestic Product (GDP) for the second quarter (Q2) in the bloc grew by just 0.1%, lower than the 0.3% expected by the markets. Although the EU had missed a recession, recently revealed data showing that business activity is slowing, Industrial Production is dropping, and hawkish stances by European Central Bank (ECB) policysetters could pave the way for an economic contraction in the Eurozone.

Given the backdrop, the EUR/USD pair is set to continue to weaken despite the ECB’s hawkish commentary. Although inflation remains high, downside risks in the EU compared to the United States (US) paint a gloomy scenario for Europe. At the upcoming September meeting, traders expect the ECB to keep rates unchanged, though Lagarde and Co are foreseen to deliver a hawkish statement.

EUR/USD Price Analysis: Technical outlook

The pair’s fall below 1.0700 has opened the door for further losses, with sellers eyeing the next intermediate support at 1.0635, the May 31 swing low. Once cleared, there’s no demand area until the EUR/USD drops towards the March 15 daily low at 1.0516. Conversely, buyers can remain hopeful of higher prices if the major prints a daily close above 1.0700. First resistance would be September 7 high at 1.0731, followed by the September 6 high at 1.0748 and 1.0800.