The EUR/USD pair traded little changed above the 1.1500 level during Tuesday’s European session, August 4, as investors remained cautious ahead of Friday’s highly anticipated US Nonfarm Payrolls (NFP) report, which could reshape expectations for the Federal Reserve’s next policy move.
At the time of writing, the pair hovered around 1.1505, with traders avoiding aggressive positions while awaiting fresh clues on the strength of the US labour market and the outlook for US interest rates.
The euro found modest support after the latest Eurozone inflation data reinforced expectations that the European Central Bank (ECB) may maintain a restrictive policy stance. Headline inflation rose to 2.9% year-over-year in July from 2.8% in June, while core inflation accelerated to 2.5%, exceeding both the previous reading and market expectations. The stronger inflation figures prompted investors to price in more than two additional ECB rate hikes, with further tightening expected by October and again early next year.
Attention now turns to Friday’s US Nonfarm Payrolls report, where economists expect the US economy to have added 83,000 jobs in July while the unemployment rate is forecast to edge up to 4.3%. Markets currently assign a 64.7% probability of a September Federal Reserve rate hike. A stronger-than-expected jobs report could strengthen the US dollar and pressure EUR/USD, while weaker data may reduce tightening expectations and support further gains in the euro.
Technical Analysis
From a technical perspective, EUR/USD maintains a near-term bearish bias as the pair continues to trade below its 100-day Simple Moving Average (SMA). Although prices remain above the 20-day Bollinger SMA, their proximity to the upper Bollinger Band suggests that upside attempts remain constrained. The 14-day Relative Strength Index (RSI) is around 58.9, indicating that bullish momentum is gradually fading rather than signalling a decisive trend reversal.
Immediate resistance is located near 1.1535, followed by the 100-day SMA around 1.1570. On the downside, the 1.1510 pivot zone serves as the first support level, with additional support at 1.1435 and the lower Bollinger Band near 1.1335.
EUR/USD is approaching a crucial technical and fundamental turning point. While stronger Eurozone inflation continues to support expectations for further European Central Bank (ECB) rate hikes, Friday’s US Nonfarm Payrolls (NFP) report is expected to determine whether the US dollar regains momentum or extends its recent weakness. With the pair trading near key technical levels, the data release could trigger significant market volatility.
For forex traders, the NFP report could shape EUR/USD’s direction in the weeks ahead. A stronger-than-expected jobs report would reinforce expectations of another Federal Reserve rate hike, strengthening the US dollar and potentially pushing EUR/USD lower. Conversely, weaker employment data could reduce Fed tightening expectations, weaken the dollar, and support further gains for the euro, making the report a key catalyst for trading opportunities throughout August.
