EUR/USD is consolidating at a major downward trendline on the daily chart as traders look past today's US non-farm payrolls report toward next week's CPI print. The dollar weakened this week on Middle East de-escalation and hopes for a US-Iran deal, but that pressure eased once the expected deal failed to materialize. The ECB, meanwhile, stays data-dependent even as markets price a strong chance of a September rate hike.
On the daily chart, EUR/USD is consolidating as momentum wanes at a major downward trendline. Sellers appear to be stepping in near the level with defined risk above it, positioning for a drop toward the 1.13 handle. Buyers, meanwhile, are waiting for a breakout to add bullish bets toward the 1.18 handle.
Dollar Bears Lose Steam as Iran Deal Stalls
The dollar weakened across the board this week after de-escalation in the Middle East and rising hopes for a US-Iran deal reduced inflation and Fed-tightening risk. However, the bearish momentum eased once the expected timeline for the deal passed without an announcement. The hopes for a deal will likely keep the dollar on the back foot for now unless tensions escalate again.
CPI Report Outweighs Today's NFP
Today's NFP report is likely to matter less than next week's US CPI print, which will be critical for the September Fed decision and the Jackson Hole Symposium. A hot inflation reading would likely trigger a dollar rally as traders raise rate-hike bets, while a soft report would ease those bets and add more pressure on the greenback. Wage growth has been easing steadily since 2022 toward pre-pandemic levels, so average hourly earnings may carry more signal than the headline jobs number today, though a big deviation from forecasts could still trigger a sizable move.
ECB Holds Rates as September Hike Bets Build
The ECB left interest rates unchanged at its last meeting but signaled through post-meeting comments that it's ready to hike in September if the inflation outlook were to deteriorate. Most policymakers who spoke after the decision stressed data-dependence and stopped short of committing to a September move, citing a lack of clear evidence of second-round effects. Still, markets are pricing a 76% chance of a rate increase in September, though another euro-area inflation report and potentially lower oil prices could still change that outlook.
EUR/USD Technical Levels
On the 4-hour chart, the swing low near the 1.15 handle now acts as key support; a break below it would open the door to further bearish bets toward new lows. On the 1-hour chart, price action may stay rangebound until the CPI report, though short-term spikes are possible around today's NFP data.
Source: InvestingLive
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