EUR Outlook Remains Challenging With a Dip Below 1.31 Increasingly Likely

"Levels around 1.31 have been all too familiar for the EURUSD pair this week, and it doesn’t seem to be getting any better. Comments from Draghi after yesterday’s rate announcement alongside employment figures could easily weigh on the euro," says Sasha Nugent at Caxton FX:

• The Euro continues to find trading conditions challenging as the below wholesale market figures show:
• The Euro Dollar exchange rate has shed a little weight in Friday morning trade; EUR/USD is lower at 1.3115.
• The Euro Pound exchange rate is 0.03 pct lower at 0.8414. The Euro really should be enjoying a relief rally against the UK unit following today's less than inspiring data points.
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German Industrial Production Ensures Euro Remains Heavy

The only major data coming out of the Eurozone on Friday concerns Industrial Production in Germany, and the results is not pro-EUR:

Output, adjusted for seasonal swings, fell 1.7 percent from June, when it jumped a revised 2 percent, the Economy Ministry in Berlin said today.

Economists forecast a decline of 0.5 percent, according to the median of 41 estimates in a Bloomberg News survey. Production slid 2.2 percent from a year earlier when adjusted for working days.

Outlook for Euro exchange rates remains challenging

Nugent warns that strong US labour data could see the EURUSD rate dip below 1.31 and with disappointing German trade balance figures already pressuring the euro, a recovery in today’s session is unlikely.

Ipek Ozkardeskaya at Swissquote says the outlook for the euro has turned sour following the breach of key support:

"Dovish comments from ECB President Draghi sent EURUSD to 1.3111 in Frankfurt yesterday. The 200-dma-support (1.3148) was breached on the downside, EURUSD consolidates losses below the larger uptrend channel bottom line.

"Reinforced, bearish trend and momentum indicators suggest the extension of the weakness. However, any disappointment in US NFP should trigger reverse price action. Expect volatility.

"The next support can be found at 1.2995 (10th July reaction high), 1.2963 (11th July low), 1.2877 (Fibonacci 50% retracement on Jul 12’ – Feb 13’ rally), then 1.2820 (20th May low).

"The first region of supply is located at 1.3148 (200 dma), 1.3342 (Fibonacci 61.8% level on Feb-March drop), 1.3455 (14th Feb high), then 1.3520 (13th Feb pivot high)."

Meanwhile, analyst Dr. Vasileios Gkionakis, Global Head of FX Strategy at UniCredit Bank says 1.30 should be seen as a solid level of support:

"A strong US unemployment report (we expect 190,000 new non-farm jobs) will very likely strengthen the USD across the board. Hence, EUR-USD should also be weaker, however, a slump below 1.30 is rather unlikely.

"The high probability of a tapering start on 18 September is likely to exert a drag on EUR-USD to the downside."