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  • Recession fears in the United States (US) continue to hurt the Greenback.
  • Uninspiring data from the euro area caps the shared currency’s gains.
  • Coming up: Nonfarm payrolls (NFP) data from the US on Friday.

After spending the first half of the day moving sideways near 1.0950 on Thursday, the EUR/USD pair gained traction during the American trading hours as the selling pressure surrounding the Greenback intensified following the dismal macroeconomic data releases from the United States (US).

However, the pair failed to break above the critical 1.1000 handle and went into a consolidation phase. As of writing, it was trading at 1.0977, adding 0.17% on a daily basis.

Following the disappointing Manufacturing Purchasing Managers’ Index (PMI) figures earlier this week, the Institue for Supply Management’s Non-Manufacturing PMI data on Thursday came in at 52.6 and missed the market expectation of 55 by a wide margin.

Heightened concerns over a possible recession in the US and the increasing probability of one more 25 basis points rate cut by the Federal Reserve in October, which is now at 90.3% according to the CME Group FedWatch Tool, forced the USD to weaken against its rivals and the US Dollar Index dropped to its lowest level since September 25th at 98.64.

No signs of a recovery in the European economy

Despite the USD sell-off, however, the fact that the European economy is also performing poorly caused the recovery gains to remain shallow. The Markit Services PMI fell to 51.4 in September in Germany from 52.5 and the Composite PMI dropped to 48.5 to show that the pace of contraction in the economic activity is accelerating. Additionally, the Producer Price Index (PPI) in the euro area slumped to -0.5% in August on a monthly basis and dragged the annual rate down to -0.8% from 0.1% in July.

On Friday, market participants will be paying close attention to the labour market report from the US. Previewing the data, “We’re calling for a slight acceleration in job creation to 160K, a level still sufficient to absorb new entrants to the labour market and keep the unemployment rate steady over the long term (approx. 110K/month),” said  analysts at National Bank Financial.

“The unemployment rate, for its part, may stay unchanged at 3.7% if, as we believe, the household survey shows just a small decline in employment following August’s outsized gain.”

Technical levels to watch for