Euro Bulls Face Resistance, NFP to Drive Rate-Cut Bets
EUR/USD Tests Key Trend Line and Horizontal Barrier at 1.1700
The Core PCE Price Index rose 0.3%, in line with expectations, which initially sent the dollar higher, but the gains were later erased, setting the dollar up for a monthly loss. The markets are now pricing in a rate cut in September, with an 87% probability, according to the CME FedWatch tool.
The US economy is struggling with weak consumer sentiment and anxiety coming from President Trump’s pressure on the Federal Reserve to cut the rates. His latest attempt to have Fed Governor Lisa Cook removed comes after several attempts to undermine Powell’s authority and to have him resign early.
The job situation is now the most important aspect and probably the final puzzle in the Fed interest rate debacle. The Non-Farm Payrolls report will be released this week and will offer important clues: if job creation falters, the Fed will be more inclined to cut the rate to spur growth. On the other hand, if the labor market proves resilient, the likelihood of a rate cut will decrease.
Economic Calendar Highlights
On Monday, US banks will be closed in observance of Labor Day, so we may see irregular volatility. The first notable release of the week is scheduled for Tuesday in the form of the US Manufacturing PMI, which shows the opinions of purchasing managers regarding the overall business condition in the Manufacturing sector. The release is scheduled for 2:00 pm GMT.
The next release will be the ADP Non-Farm Employment Change report, scheduled for Thursday at 12:15 pm GMT. This is a privately-issued report that tries to mimic the government-issued NFP that comes out 1 day later. Its impact is not as big, but it’s still worth keeping an eye on. The US Services PMI will be released later on Tuesday, at 2:00 pm GMT.
The Non-Farm Payrolls (NFP) report, which is the most anticipated data of the week, will be released on Friday at 12:30 pm GMT. The anticipated number is 74K, and anything above this would suggest that the economy is moving on the right path, possibly affecting the rate cut probabilities.
Technical Outlook – EUR/USD
The pair is at a crossroad, trying to break a bearish trend line and the horizontal resistance at 1.1700. In the recent period, the euro bulls attempted several times to break this confluence zone but failed to do so.
The many attempts show there is still increased bullish pressure, but the Bollinger Bands are moving closer together, and the volume is decreasing, suggesting that the pair may enter a ranging period if a strong breakout does not occur soon. The RSI is also rather neutral, moving in the middle of the range and without a clear signal. The biggest move will probably occur on Friday, after the NFP release.
