The EUR/USD exchange rate has surged to a multi-week high of 1.1760, reflecting a bullish sentiment among traders in the wake of disappointing US nonfarm payrolls (NFP) data. Since hitting its lowest point earlier this year, the pair has gained approximately 15%, and it now hovers near the year-to-date high of 1.1828, signaling strong upside momentum.
This movement underlines the increasing importance of key fundamental events, particularly the upcoming European Central Bank (ECB) decision and US Consumer Price Index (CPI) data. BluSkyMint’s broker Kate Mclaren presents a thoughtful and comprehensive explanation of this subject.
Weak US Jobs Data Sparks USD Weakness
The recent US jobs report indicated that the labor market weakened in August, adding just 22,000 jobs, while the unemployment rate climbed to 4.3%, marking the highest level since the COVID-19 pandemic. Additionally, the Bureau of Labor Statistics (BLS) revised the July jobs figure slightly upward by 2,000, but June’s number was adjusted downward, indicating a contraction in employment for the first time since 2020.
These subdued employment figures have intensified speculation that the Federal Reserve (Fed) may implement an interest rate cut at its next meeting. Market participants are increasingly pricing in a 0.25% rate reduction, while some analysts suggest a 0.50% cut is possible if the Fed decides to actively stimulate the labor market.
The USD’s relative softness following the NFP release has allowed the EUR/USD pair to break above key technical levels, signaling a bullish trend in the near term.
US Inflation Outlook: CPI in Focus
The next major market-moving event for EUR/USD traders will be the release of the US inflation data, specifically the Consumer Price Index (CPI). According to a Reuters poll, economists anticipate that the headline CPI will remain steady at 2.9% in August, unchanged from July. Meanwhile, core inflation, which excludes volatile food and energy prices, is expected to edge up from 3.1% to 3.2%.
These figures will provide critical insight into the Fed’s policy trajectory. If inflation remains elevated despite weak employment growth, it could indicate that the US economy is experiencing stagflation, a scenario characterized by stagnant growth and persistent inflation.
This complex environment may limit the Fed’s room for aggressive rate cuts, potentially creating volatility in the EUR/USD pair.
ECB Decision: Interest Rates in Focus
Meanwhile, EUR/USD traders are closely watching the upcoming ECB meeting, where policymakers are widely expected to maintain interest rates. The ECB’s cautious stance, combined with potential Fed rate cuts, could reinforce the euro’s strength against the dollar.
Any signals from the ECB regarding future monetary policy or quantitative easing measures will likely have a direct impact on EUR/USD trading strategies.
Technical Analysis: Bullish Momentum
From a technical perspective, the EUR/USD pair has shown strong bullish momentum following the NFP release. The currency pair has successfully broken above the 50-day and 25-day moving averages, signaling that bulls are in control.
Additionally, the pair has formed a highly bullish inverse head-and-shoulders pattern, a classic reversal formation that typically precedes upward moves.
The Ichimoku cloud indicator further supports the bullish outlook, as EUR/USD remains above the cloud, confirming positive market sentiment. Traders observing these technical signals may anticipate a retest of the year-to-date high at 1.1830. A decisive move above this level could open the door for further gains, with resistance projected around 1.1900.
Key Support and Resistance Levels
For traders employing a technical trading strategy, it is essential to monitor key support and resistance levels. Immediate support is likely to be found around 1.1700, while resistance levels are located at 1.1830 and 1.1900.
A breakout above these levels could trigger additional buying momentum, reinforcing the bullish trend. Conversely, a failure to sustain these levels may lead to a short-term pullback, offering opportunities for traders to enter at lower price points.
Conclusion
In summary, the EUR/USD Forex signal points to bullish momentum ahead of crucial US inflation data and the ECB decision. With the USD under pressure following weak NFP numbers and technical indicators confirming upward momentum, traders can expect potential gains toward 1.1830 and 1.1900.
Monitoring both fundamental and technical factors will remain critical for making informed trading decisions, as volatility is likely in the lead-up to these market-moving events.
The combination of technical bullish signals, fundamental drivers, and central bank policy expectations makes the EUR/USD pair an attractive candidate for traders seeking opportunities in the forex market this week.
