Selling EURUSD down to 1.0900

The US initial jobless claims data were released yesterday.

The number of Americans filing new claims for unemployment benefits dropped more than expected, easing fears of a slumping labor market and confirming that the economy is slowly cooling.

Initial claims for unemployment benefits fell by 17,000 to a seasonally adjusted rate of 233,000 in the week ended August 3, the Labor Department said. That was the biggest drop in 11 months. Economists polled by Reuters had forecast 240,000 claims.

It was a long-awaited reversal after last week's unexpected surge in jobless claims, and likely reflects the waning impact of temporary disruptions of vehicle plant operations and Hurricane Beryl's damage. The previous week's figure was revised slightly upward to 250,000 from the 249,000 expected earlier.

This is another sign that last week’s worse-than-expected monthly payrolls report for July was a temporary deviation, partly due to the record number of people unable to work in bad weather conditions.

The Fed also keeps a close eye on how the number of unemployed people matches the number of people in the labor force to gauge the state of the labor market. Labor force growth has largely corresponded with a gradual increase in the number of those claiming unemployment benefits. It is now at about the same level as it was before the coronavirus pandemic.

Investors in interest rate futures reduced their positions on whether the Fed will begin cutting borrowing costs next month, with a larger-than-usual decline of 50 basis points, to a 58% probability, down from 70% before the data were released.

Yesterday's US labor market news created a short-term momentum to weaken EURUSD. The pair broke through the level of 1.0900 yesterday and today returned to yesterday's opening price. It is likely that today EURUSD will try to retest this level.

The overall recommendation is to sell EURUSD.

Profits should be taken at the level of 1.0900. A Stop loss could be set at the level of 1.0930.

The possible loss should not exceed 2% of your deposit funds.