The battle against inflation seems far from over. With a resilient US job market firmly in place, consumer spending will likely remain too high for the Federal Reserve (Fed) not to act on.  

The EURUSD shed 1.07% after the US economy added 517,000 jobs, a figure way over consensus at 185,000. According to Glassdoor, the US unemployment rate is currently at 3.4%, the lowest figure since 1969. This has renewed expectations of future interest rate hikes by the Fed and is likely to benefit the US Dollar in short to medium term. Based on the CME FedWatch tool, probabilities of a 25bps rate hike in March went up to 94.5% from 82.7%, signalling more hawkishness ahead. 

Technicals

The EURUSD cash market gave up its bullish run and is trading 2.23% off the recent highs. Bears have taken control of the market in anticipation of future Fed rate hikes. 

Price is trading at support at the 1.07864 level; after a significant sell-off, the price action moved back higher to the resistance at 1.09311. Traders will closely monitor the support level for a breakout below. If a breakout below support occurs on high volumes, it could likely signal continued bearish pressure. The next target in sight at the 1.07125 level is probable. On the other hand, if bearish sentiment fades away at this level, it may provide bullish traders with an opportunity to take the EURUSD higher, with a potential target at the 1.09311 level.    

Summary 

Europe and the US are battling high inflation rates and are likely to continue raising interest rates. Higher interest rates benefit the US Dollar more, as it is viewed as a safe haven currency and usually attracts more global capital. The EURUSD currency pair may experience downward momentum in the near future.

Sources: Koyfin, TradingView