EUR/USD: August NFP more important than normal - BTMU

Analysts from The Bank of Tokyo-Mitsubishi UFJ see a bearish bias in the EUR/USD pair and expect it to trade between 1.0950 and 1.1350.

Key Quotes:

“The US dollar is trading on a stronger footing in the near-term supported by the hawkish signal from the Fed that it is moving closer to resuming rate hikes. As a result the release of the latest non-farm payrolls report for August is even more important than normal for US dollar performance in the week ahead. Another solid employment report should prompt the market to price in a higher probability of a rate hike this month. We see scope for further US dollar strength in the near-term if the Fed delivers a rate hike this month.”

“In contrast, US dollar downside should prove limited unless employment growth weakens significantly coming in below 100k/month. The euro will likely derive some support from the upcoming ECB policy meeting helping to dampen EUR/USD downside even if the non-farm payrolls is solid. The negative impact on the euro-zone economy from the Brexit vote has been limited so far.”

“We no longer believe there is a compelling case for the ECB to announce imminent easing at their upcoming meeting. However, we will be watching for any signal from the ECB that it plans to extend QE beyond March of next year. An announcement is now more likely to be delivered later this year or early next year.”