Rate Cut Chances Rise Amid Jobs Slowdown, CPI on the Horizon

EUR/USD Approaches Key Resistance with Triple Top in Play

The latest US jobs report revealed a surprising increase in Non-Farm Payrolls, rising to 206K against the anticipated 190K. Despite this headline boost, the finer details were less encouraging. The unemployment rate climbed to 4.1%, marking its highest point since November 2021. Additionally, average hourly earnings grew by just 3.9% year-over-year, the lowest rate since June 2021.

The FOMC Minutes revealed that Fed officials remain cautious, seeking more concrete signs of cooling inflation. They are currently split on the duration for which they should maintain the current high interest rates.

After the NFP release, traders have adjusted their expectations, now predicting a 72% chance of a rate cut by the Federal Reserve in September, as indicated by the CME FedWatch tool. We will probably see some changes in that probability, considering that the main inflation gauge – the CPI – is due for release this week.

Economic Calendar Highlights

Fed Chair Jerome Powell will testify twice this week, on the Semi-Annual Monetary Policy Report. The first testimony takes place Tuesday at 2:00 pm GMT before the Senate Banking Committee and the second time takes place Wednesday at 2:00 pm GMT before the House Financial Services Committee. It’s unclear how the testimonies will affect the US Dollar but caution is advised.

The main event of the week will be the release of the U.S. CPI numbers scheduled for Thursday at 12:30 pm GMT. The headline figure for the Consumer Price Index is expected to show a year-over-year drop to 3.1% from the current 3.3% but the monthly figure is expected to grow 0.1% from the previous 0.0%. The Core CPI (month-over-month) is expected to stay unchanged at 0.2%.

The U.S. Producer Price Index will come out Friday at 12:30 pm GMT, followed at 2:00 pm GMT by the UoM Consumer Sentiment survey.

The PPI has inflationary implications because a higher price charged by the producers will eventually translate into a higher price charged to the consumer.

The Consumer Sentiment survey is correlated with Retail Sales because a confident consumer usually spends more.

Technical Outlook – EUR/USD

Last week was a bad one for the US Dollar, as the Euro bulls managed to take the pair confidently above the resistance at 1.0775. After a lot of jerky movement on the bearish trend line, it looks like this technical element did its work after all and pushed the price higher.

Now the pair is trading above the 50-day Moving Average and above the previous resistance at 1.0775 (which may turn into support. If the pair gets there, we will be dealing with a potential triple top.

If the price continues past 1.0900, it means the bulls have managed to break the already existing double top, which is a sign that the pair is likely to continue north.