The EUR/USD exchange rate surged to its highest level since July 28, breaking through key resistance levels, as Federal Reserve Chair Jerome Powell hinted at a pivot towards interest rate cuts. The currency pair jumped to 1.1725, a significant rise from this month’s low of 1.1390, driven by concerns over the US labor market and shifting expectations for monetary policy.
Market attention now turns to the upcoming US macroeconomic data, which could further influence the EUR/USD trend in the near term. In this article, Jacob Lansky of PrimeberGroup delivers a step-by-step analysis of the matter.
Federal Reserve Signals Rate Cuts
The EUR/USD rally accelerated after Powell suggested that the Federal Reserve (Fed) may implement rate cuts in the near future, possibly as early as the September meeting. This policy shift was largely influenced by weakening employment figures, where US job growth slowed dramatically. According to recent nonfarm payroll data, the economy added only 73,000 jobs, and the unemployment rate ticked up to 4.2%, signaling a slowdown in the previously robust labor market.
Powell delivered these comments during the Jackson Hole Symposium, an annual gathering of policymakers and central bankers that often provides critical guidance on future monetary policy. His remarks came shortly after the Fed released minutes from its latest monetary policy meeting, which had previously signaled ongoing concerns about inflationary pressures, particularly amid trade tensions and tariffs.
The shift from a hawkish stance to a more dovish outlook underscores the Fed’s responsiveness to changing economic indicators, particularly employment. This dovish pivot has had a pronounced impact on EUR/USD sentiment, as traders anticipate lower US interest rates, making the euro more attractive relative to the US dollar.
Key Macroeconomic Data on the Radar
The EUR/USD pair will be closely influenced by several high-impact US economic releases this week. First, the Conference Board Consumer Confidence report, due on Tuesday, will provide insights into household sentiment following the weaker-than-expected jobs report. Economists forecast a slight dip to 97.8 from the previous 98, signaling a moderation in consumer optimism.
Later in the week, the Personal Consumption Expenditures (PCE) report on Friday will be a focal point for traders. The PCE index, widely regarded as the Fed’s preferred measure of inflation, tracks price changes across both rural and urban sectors. A higher-than-expected reading could temper dovish expectations, while a softer PCE print would likely reinforce the case for interest rate cuts, supporting further EUR/USD gains.
Other critical releases include the US GDP report, which will indicate the overall economic growth trajectory, and flash European inflation data, which could affect the eurozone outlook. Together, these data points are expected to guide short-term EUR/USD positioning and validate the recent bullish momentum.
EUR/USD Technical Outlook
From a technical perspective, the EUR/USD exchange rate has rebounded strongly on the 12-hour chart, moving above the 25-day and 50-day moving averages, which are key indicators of medium-term trend direction. The formation of an inverse head-and-shoulders pattern signals a potential bullish reversal, suggesting that the pair may continue climbing towards the year-to-date high of 1.1835.
Momentum indicators further support this uptrend. The Relative Strength Index (RSI) has moved into positive territory, indicating renewed buying pressure, while the Stochastic Oscillator points upward, signaling upward momentum. Both suggest that EUR/USD bulls remain in control, and further upside remains likely if upcoming macro data aligns with expectations.
Resistance levels to monitor include the previous high of 1.1725 and the YTD peak at 1.1835, while support lies near 1.1650, followed by 1.1600. A sustained break above 1.1725 could trigger further technical buying, while a reversal below 1.1600 may indicate short-term profit-taking or consolidation.
Market Implications
The EUR/USD breakout highlights the growing influence of monetary policy divergence on forex markets. As the Fed considers rate cuts while the European Central Bank (ECB) maintains its current stance, traders are increasingly pricing in US dollar weakness. This dynamic underscores the importance of closely monitoring employment data, consumer sentiment, and inflation metrics, which will continue to drive short-term EUR/USD volatility.
In conclusion, the EUR/USD pair is showing clear bullish momentum, fueled by Powell’s dovish shift and weakening US labor market conditions. With key US macroeconomic data scheduled this week, including the Consumer Confidence report, PCE index, and GDP figures, traders should anticipate potential market-moving events. Technical indicators reinforce the uptrend, positioning EUR/USD bulls to target the year-to-date high of 1.1835 while keeping a close eye on support levels in case of short-term pullbacks.
