Home Forex Market Analysis EUR/USD: Euro Inches Higher Amid Positive Employment Data

EUR/USD: Euro Inches Higher Amid Positive Employment Data

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EUR/USD: Euro Inches Higher Amid Positive Employment Data
  • France and Spain had positive economic data for 2021 due to strong state-backed actions. 
  • Strong Eurozone PMI supports the growth and expansion of Europe’s industrial sector into Q2 2021. 
  • The US is set to witness increased household savings from the stimulus plan in 2021.  

The euro has risen 1.21% against the US dollar in the week leading to April 6, 2021, to close at 1.18536. A higher Sentix investor confidence rate was recorded on April 6, 2021, which pushed the euro owing to positive economic data in the eurozone. The data was bullish for the euro as it rose to 13.1 from a previous reading of 5.0. On its part, labor statistics in the US indicated that job openings rose to 7.367 million on April 6, 2021, from a previous record of 7.099 million. This data was insufficient to push the dollar against the euro, but it signaled positive news in favor of the stimulus efforts into Q2 2021 concerning job creation. 

Eurozone’s employment rate

February 2021 saw the Eurozone stabilize its unemployment rate at 8.3% through government programs. The rate was 7.3% in February 2020 and 4.5% in Germany during the pre-pandemic times. This rate meant that 13.57 million people were jobless in Q1 2021 (1.507 million higher year-on-year). 

Youth unemployment also inched up slightly by 0.1%, from 17.4% in January 2021 to 17.3% in February 2021. However, severe long-term unemployment shocks were prevented by job-guarantee schemes in the EU and government policies that protected jobs.

PMI and economic growth

The Eurozone’s PMI inched up 62.5 in March 2021 from 57.9 in February 2021, indicating industrial expansion towards the end of Q1 2021. France downgraded its economic expansion in 2021 from 6% to 5% as it instituted the third lockdown to tackle the pandemic. 

Despite the closure of bars and restaurants in the hospitality industry, France has set up state-backed loans to help small businesses, rental and unemployment support schemes. April 2021 may see the country spend up to €11 billion to help closed businesses as it enforces tighter restrictions.

The International Monetary Fund (IMF) raised its growth predictions for Spain in 2021 to 6.4% from 5.9%. The economy had begun to show optimism after positive unemployment data in March 2021 indicated jobless claims had dropped 1.48%. At least 3.9 million remained jobless into April 2021, with the tourism sector worst hit. It plunged 93.6% Y/Y in February 2021 after the hospitality industry was shut down to curb the spread of COVID-19.  The year 2020 saw international tourists to Spain decline to 19 million (a drop of 80%), the worst fall since 1969. 

US vaccination and employment rates

After rolling out the massive vaccination program, the Biden Administration managed to increase nonfarm payrolls by 916,000 jobs in March 2021.

High US factory hiring into 2021

High US factory hiring into 2021

Up to 1.6 million jobs were added to the US economy in Q1 2021. A total of 157.6 million COVID-19 doses were administered towards the end of March 2021, with 204.7 million distributed by the CDC. Job growth is expected to average approximately 700,000 per month towards Q4 2021. The US economy will be boosted not only by the fiscal stimulus plan but also $19 trillion in excess savings by US households. The pandemic has seen qualified homes receive checks worth $1,400 and other funds that will increase demand in Q2 and Q3 of 2021. 

Technical analysis

EUR/USD Technical analysis

EUR/USD

A pipe bottom has been spotted after the downtrend supporting a bullish reversal from intraday trading on April 6, 2021. There was an uptrend from a low 1.17001 to a high of 1.18776. The bullish reversal is likely to continue, albeit in the short term due to strong fundamentals supporting the dollar. The 14-day RSI supports a neutral position at 44.40, showing that investors are still watching the dollar before increasing their buy positions.

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