The ECB and the Fed both lean hawkish, yet a soft US jobs report has left the Fed’s data sending mixed signals. EUR/USD stays confined to the range it has held for roughly the past year, and which side prevails could well set the pair’s tone into year-end.
Two central banks hold hawkish tones, but only the dollar has just taken a hit — and that split leaves EUR/USD confined to the range it has held for roughly the past year. FXOpen casts the pair’s next major trend as a question of which one, the ECB or the Fed, becomes the catalyst.
Two hawkish banks, one soft jobs print
The ECB delivered a 25bp hike in June, its first since 2023, lifting the deposit rate to 2.25%. Middle East-driven energy costs pushed headline inflation to 3.2% in May before it eased to 2.8% in June, and growth was downgraded to 0.8% amid weaker confidence.
The Fed, under new Chair Kevin Warsh, held rates at 3.50%-3.75% for a fourth straight meeting, with a hawkish dot-plot shift initially fueling rate-hike expectations. However, the June employment report released on July 3rd showed nonfarm payrolls rising by just 57K against 110K expected, the weakest reading in four months. The unemployment rate dipped to 4.2%, but only because the labor force participation rate fell to 61.5%, its lowest level in five years.
The range that keeps holding
EUR/USD has spent roughly the past year confined within a broad consolidation range, oscillating between well-defined boundaries with no decisive breakout sustained in either direction. After briefly breaking below the range’s base support, price snapped back quickly.
For renewed bullish momentum, EUR/USD first needs to hold above the 1.1420-1.1460 support zone. The next test lies with the descending trendline from January’s highs, an area that also converges with the 200-period EMA and a long-term ascending trendline broken to the downside in June. That confluence makes 1.1500-1.1550 the pivotal zone for a clean break higher.
Where the downside opens up
The bearish reading is that price is only retesting the previously broken support at 1.1420-1.1460. A decisive break below the 1.1320-1.1350 low would confirm renewed downside momentum, clearing the path toward the next significant support around 1.1100-1.1150.
Either scenario will likely need technical structure and fundamentals to align, with central bank rhetoric and action remaining the key driver. Which side ultimately prevails, the ECB or the Fed, could well set the tone for EUR/USD’s trend into year-end.
Source: Action Forex
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