EUR/USD erases weekly gains on USD rally, remains below 1.18

The EUR/USD pair lost more than 100 pips after the strong employment data from the United States helped the US Dollar Index record its best daily percentage gain in nearly 8 months. After slumping to 1.1730 in the early NA session, the pair went into a consolidation phase and is now trading at 1.1765, as investors get ready to wrap up the week.

Today's NFP report solidified the view that the economic growth in the U.S. has shaken off the slowdown witnessed during the first half of the year. According to the data released by the U.S. Labor Department on Friday, nonfarm payrolls increased by 209,000 jobs in July, beating the market consensus of 183,000. Additionally, the unemployment rate fell to 4.3% while average hourly earnings recorded its largest increase in five months with 0.3%, ramping up the expectations for a December rate hike.

• US NFP: Federal Reserve likely to continue tightening on strong jobs report - Danske Bank

After the data, the US Dollar Index jumped to its highest level since July 28 at 93.63 before retracing some of its gains towards the end of the week. Nevertheless, the index is still headed for its first positive weekly close in four weeks as it's adding 0.7% on the day, at 93.40.

• US Dollar quiet around mid-93s, looking to close first week of August on a high note

On Monday, the economic docket won't be featuring any data from the euro area or the United States that could potentially impact the pair's price action, and we could see the continuation of this downward correction. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes, "in the daily chart, technical indicators left overbought territory with sharp bearish slopes, but the price remains above a bullish 20 DMA, currently around 1.1660, also above a daily ascendant trend line, which comes around 1.1500 for the upcoming week. 2015 high is at 1.1713, while 2016 one comes at 1.1615, the key supports for next week confirming an interim top and favoring a decline towards the mentioned trend line."

She further adds, "to the upside, 1.1785 is the immediate resistance, followed by the 1.1860/70 price zone. An extension beyond this last will likely result in a bullish breakout and an approach to the 1.2000 level during the upcoming sessions."

• Constructive US jobs, but, where do euro bulls make a stand? - BBH