Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1830.
- Add a stop-loss at 1.1650.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1650.
- Add a stop-loss at 1.1830.
The EUR/USD exchange rate rose to a multi-week high of 1.1760 as it reacted to the weak US nonfarm payrolls (NFP) data. It has risen by 15% from its lowest point this year and is hovering near the year-to-date high of 1.1828.
ECB Decision and US Inflation Data
The EUR/USD exchange rate rose after the recent US jobs numbers, which showed that the situation worsened in August. The economy added just 22,000 jobs as the unemployment rate rose to 4.3%, the highest point since the pandemic.
While the BLS revised the July jobs report by 2,000, it lowered the June number to show that the economy lost jobs for the first time since 2020.
Therefore, the weak jobs numbers mean that the Federal Reserve will cut interest rates by 0.25% in the next meeting next week. While the most likely scenario is for it to cut by 0.25%, some analysts predict that it may cut by 0.50% to intervene in the labor market.
The next important EUR/USD news will be the upoming US inflation data, which will provide more color about prices. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) rose to 2.9% in August from the previous 2.9%.
Core inflation, which excludes the volatile food and energy prices, is expected to move from 3.1% in July to 3.2% in August. If accurate, these numbers will mean that the impact of Donald Trump’s tariffs on inflation is gradual. It will also complicate the Fed’s cuts as it will confirm that the economy is in a stagflation.
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The EUR/USD exchange rate will also react to the European Central Bank (ECB) decision in which officials are expected to leave interest rates unchanged.
EUR/USD Technical Analysis
The EUR/USD rose as the US dollar softened after the latest US jobs numbers. It moved above the 50-day and 25-day moving averages, a sign that bulls are in control.
The pair has also formed the highly bullish inverse head-and-shoulders pattern. It also remains above the Ichimoku cloud indicator.
Therefore, the most likely scenario is where the EUR/USD pair rebounds and retests the year-to-date high of 1.1830. A move above that level will point to more gain, potentially to the resistance level at 1.1900.
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