- The US dollar is nearing a two-week high against the euro, driven by market expectations for the upcoming US payrolls report and its potential impact on the US Federal Reserve’s policy.
- The EUR/USD price is stable around 1.1060 at the time of writing, recovering from yesterday’s losses that reached the 1.1026 support level and giving up the 1.1200 psychological resistance.
- With important economic data due this week, including the pivotal US jobs report on Friday, traders are closely watching for clues on the Fed’s next move on interest rates.
US jobs data
This week's spotlight is on the US jobs data, which is expected to provide crucial insights into the health of the Labor market. Economists expect an increase of 165,000 jobs in August, a significant improvement from the 114,000 increases in July. This report will be instrumental in shaping the Federal Reserve's decisions regarding potential US interest rate cuts. Recent statements by Federal Reserve Chair Jerome Powell, suggesting the possibility of US interest rate cuts due to a slowing Labor market, have increased market expectations. Therefore, the jobs report is not just a monthly statistic; it is a crucial factor in determining the Federal Reserve's approach to managing economic growth and inflation.
Following the jobs data, attention will turn to additional reports: job openings data on Wednesday and initial jobless claims on Thursday. Moreover, these figures will further impact market sentiment and expectations for Federal Reserve policy.
US Manufacturing Index Shows Slight Improvement
In addition to the Labor market data, the US Manufacturing Index showed a modest improvement in August, rising slightly from an eight-month low in July. This rise, driven by increased hiring in the sector, suggests some stabilization in manufacturing activity. However, factory activity overall remains weak, reflecting ongoing challenges in the US industrial sector. Meanwhile, the slight improvement may point to a potential bottom, broader economic uncertainty – both global and domestic – continues to cloud the outlook.
EUR/USD Falls
According to reliable trading platforms, the euro fell 0.3% against the US dollar on Tuesday, falling to $1.1026, its lowest level in two weeks. As a result, currency traders are positioning themselves cautiously ahead of the US jobs data, anticipating possible market volatility. Analysts expect volatility in the foreign exchange market as US participants return from the Labor Day holiday and adjust their positions in anticipation of the jobs report. Overall, financial markets are now pricing in a 69% chance of a 25-basis point cut in US interest rates at the Federal Reserve’s September 17-18 meeting, with a 31% chance of a larger 50 basis point cut, according to the CME FedWatch tool.
Meanwhile, the likelihood of a 100-basis point cut this year will largely depend on this week’s economic data, particularly the jobs report. Also, the Fed’s strategy will depend on whether the upcoming figures indicate a sharp slowdown in economic activity or a more moderate trend.
About the Forex Market Outlook Traders are assessing whether the US dollar’s decline in August was excessive or if more downside is on the horizon. A weaker-than-expected jobs report could further weaken the dollar, strengthening the case for more aggressive rate cuts by the Federal Reserve. As the week progresses, all eyes will be on the incoming data to gauge the future path of both the dollar and the Fed’s policy.
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EUR/USD Technical analysis and forecast:
As expected, the EUR/USD pair will remain range bound as markets and investors react to the important US jobs numbers at the end of the week. Technically, to break the general uptrend in the EUR/USD pair based on the performance on the daily chart attached, bears should move prices towards the support levels of 1.0975 and 1.0880 respectively. On the other hand, for the same time frame, the psychological resistance of 1.1200 will remain the most important to confirm the bulls’ control over the trend.
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