- EUR/USD forecast remains mildly bullish amid weaker dollar.
- Fed’s rate cut probability in September is 94% amid weaker economic outlook.
- Weaker US jobs data and geopolitical optimism continues to support euro.
The EUR/USD forecast remains slightly bullish, staying around mid-1.1600, supported by weakening US economic indicators and unresolved political uncertainty in Washington. However, the pair is off the recent peak near 1.1700.
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Markets are pricing in Fed’s aggressive easing, with a 94% probability of a 25 bps in September. The euro benefits from a shift in rate expectations and geopolitical optimism like peace talks and relief to European energy flows.
According to Scotiabank analysts, “The solid EUR rebound last Friday from the 1.14 area still has potential to extend through 1.17 and retest the recent highs around 1.18 in the near term.”
Meanwhile, the US labor market is showing signs of deterioration. The initial jobless claims data rose to 226k for the week ending Aug 2 against the previous reading of 219k. The continuing claims surged to 1.974 million, the highest since Nov 2021. However, the unemployment rate stays steady at 4.2% but weakening hiring and deteriorating labor retention are signaling odds of Fed easing sooner than expected.
The slowdown in the US labor market growth, combined with weaker US NFP data provides further clarity to the Fed to pivot towards easing. Moreover, diplomatic breakthrough supporting inflation outlook and Europe’s growth, underpin euro’s resilience.
EUR/USD Technical Forecast: Unclear Trend Awaits Catalyst
The EUR/USD 4-hour chart shows a downside correction from the recent swing high near 1.1700 area. The pair got rejection from the 200-period SMA and slowly approaching the 100-period SMA. The price has not been in a clear trend as the pair may oscillate between the two key MAs.
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The downside may find a confluence of support at round figure of 1.1600, accompanied by Aug 04 high and 20-period SMA. On breaking below the 20-period SMA, the price may continue the downside and test 50-period SMA at 1.1550. Staying above the 20-period SMA and the 1.1600 support may gather buying traction and push the pair towards 200-period SMA around 1.1660 ahead of swing high of 1.1700.
The RSI slid to under 60.0 level after reaching the overbought zone, suggesting no clear momentum for now. However, further consolidation around current levels may attract sellers.
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