2025-09-08
EUR/USD climbed sharply last Friday, reaching a high near 1.1760. before closing at 1.1719. as markets reacted to unexpectedly weak US nonfarm payrolls. On Monday during the Asian session, the pair maintained its gains, trading narrowly between 1.1703 and 1.1719. signalling cautious optimism among traders.
The sudden move came amid heightened speculation that the Federal Reserve may cut interest rates by 25 basis points at its meeting on 17 September, with some market participants already pricing in a possible additional reduction in October.
1) Weak US Economic Data
Friday's nonfarm payroll report surprised investors with negative job growth, unsettling markets and fuelling expectations that the Fed will act to support the economy.
2) Fed Policy Expectations
Traders are increasingly convinced that the Fed will adopt a dovish stance, potentially signalling further rate cuts in the months ahead. This has lent support to the euro against the dollar, as investors reassess relative monetary policy.
3) Market Sentiment
Despite the softer US jobs data, financial institutions remain wary of medium-term inflation risks. Narrative-driven trading and large institutional flows are amplifying volatility in EUR/USD, creating rapid price swings.
Support and Resistance:
1.1700: Key psychological and technical support level. Stabilisation above this threshold could indicate the formation of a new upward trend.
1.1740–1.1750: Near-term target zone for institutional traders.
1.1760: More aggressive upside target, reflecting short-term speculative pressure.
Chart trends suggest that when EUR/USD holds above 1.1700. momentum for further gains could increase, though volatility remains elevated.
1) Eurozone Challenges
The euro faces its own headwinds, with sluggish growth in Germany, fiscal strain in France, and inflation in the eurozone consistently exceeding expectations. This leaves the European Central Bank (ECB) in a delicate position: balancing growth concerns against inflationary pressures.
2) Fed-ECB Policy Interaction
The interplay between Fed rate cuts and ECB policy decisions will continue to shape EUR/USD. Traders are navigating a complex landscape where both central banks' actions carry significant implications for the pair's trajectory.
3) Short-Term vs Mid-Term
Short-term, EUR/USD is likely to continue testing support and resistance levels within a narrow range. Over the medium term, dovish Fed signals could bolster the euro further, particularly if market sentiment remains risk-on.
Bullish Case:
If EUR/USD stabilises around 1.1710 and exhibits upward momentum, the pair could target 1.1740–1.1750 in the coming sessions, with 1.1760 as a potential stretch target.
Bearish Case:
A break below 1.1700 could undermine short-term bullish sentiment, prompting traders to reassess positions and test lower support levels.
EUR/USD remains highly sensitive to US employment data and Fed policy expectations. Stabilisation above 1.1700 may mark the beginning of a renewed upward trend, while broader eurozone risks and central bank actions will continue to influence market sentiment. Traders should monitor key support and resistance levels closely as they navigate the current period of elevated volatility.
1. What caused EUR/USD to surge past 1.17?
Weak US nonfarm payrolls and rising expectations of a Federal Reserve rate cut drove the euro higher against the dollar.
2. Why is 1.1700 considered a key level?
1.1700 serves as a critical support point; stabilisation above it may signal renewed bullish momentum.
3. How do Fed and ECB policies affect EUR/USD?
Differences in US and eurozone interest rate expectations influence currency flows, with dovish Fed signals generally supporting the euro.
4. What are the near-term targets for EUR/USD?
Short-term targets include 1.1740–1.1750. with 1.1760 as a more aggressive upside level if bullish momentum continues.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
