EUR/USD experienced a slight retreat from its intraday highs above 1.1100, but still maintained some gains amidst solid expectations of a Federal Reserve rate cut. The focal point for the US Dollar will be the release of the August US Nonfarm Payrolls (NFP) report. In addition, the European Central Bank (ECB) is strongly expected to reduce interest rates this month, reflecting concerns about weak growth prospects and persistently easing inflationary pressures.
Despite facing selling pressure around the crucial resistance level of 1.1100, EUR/USD traded higher during the North American session as the upbeat United States ISM Services Purchasing Managers Index (PMI) data for August provided considerable support to the US Dollar. However, weak US private employment figures, like the ADP Employment Change data, have heightened concerns regarding a weakening labor market, thereby increasing expectations for a significant Fed interest rate cut.
The Euro has proven to be resilient against major currencies, including the US Dollar, despite a decline in Eurozone Retail Sales. The ECB is likely to resume its policy-easing cycle this month, with officials expressing worries about poor growth prospects. Eurozone growth concerns have further deepened following a slower-than-expected economic activity expansion in recent reports, including the final estimate HCOB PMI report.
Technical analysis suggests that EUR/USD has faced selling pressure above 1.1100 but remains on solid ground near the 20-day Exponential Moving Average (EMA) at 1.1055. The longer-term outlook is bullish, supported by upward-sloping 50-day and 200-day EMAs and a Rising Channel breakout on the daily time frame. The 14-day Relative Strength Index (RSI) has declined from overbought levels, indicating a potential downside correction. The next upside targets for Euro bulls are the recent high of 1.1200 and the July 2023 high at 1.1275, with downside support near 1.1000.
In conclusion, the EUR/USD pair faces a mix of bullish and bearish factors, with market sentiment being influenced by economic data releases and central bank decisions. The upcoming US NFP report will be a major event to watch for further direction in the currency pair. The ECB’s expected interest rate cut and concerns over Eurozone growth prospects are likely to impact the Euro’s performance in the coming days. Traders are advised to closely monitor technical levels and economic developments to navigate the shifting dynamics in the EUR/USD forex market.
