EUR/USD Price Holds Above 1.1720 as Fed Cut Bets Drive Dollar Weakness

EUR/USD Gains Momentum on Weak US Jobs and Fed Cut Bets

The EUR/USD currency pair trades close to 1.1725, extending its recovery after the U.S. August Nonfarm Payrolls report showed only 22,000 jobs added, far below the 75,000 expected. The unemployment rate jumped to 4.3%, its highest since 2021, solidifying expectations for a Federal Reserve rate cut at the September 16–17 meeting. According to CME FedWatch, markets now price a 92% probability of a 25 bps cut and a growing minority betting on 50 bps. The weaker dollar has been the dominant driver for EUR/USD, pushing the pair higher despite political and economic risks in Europe.

French Political Turmoil and Eurozone Stability

In Europe, focus is on the confidence vote against French Prime Minister François Bayrou and his €44 billion budget package. Opposition leaders, including Jean-Luc Mélenchon of France Unbowed, have openly declared they will vote him out, which could trigger snap elections and inject further instability into the eurozone’s political landscape. Despite this risk, EUR/USD has held firm above 1.1700, supported by U.S. dollar weakness and expectations that the European Central Bank will keep rates unchanged at 2.0% this Thursday.

Technical Outlook for EUR/USD

From a chart perspective, EUR/USD has broken above the 50-day EMA at 1.1697 and 200-day EMA at 1.1673, confirming bullish short-term momentum. The pair recently tested 1.1760, a multi-week high, and remains poised to challenge resistance at 1.1780–1.1830, which marks the July peak. Beyond that, targets align at 1.1900–1.1960, with extended upside toward 1.2060 if momentum continues. On the downside, failure to defend 1.1709 could open retracement back to 1.1679, with deeper support at 1.1600. The RSI sits near 61, not yet overbought, leaving room for another leg higher.

Macro Data and CPI Risks

Markets are now looking toward U.S. CPI on Thursday, with consensus for headline inflation to rise 0.3% MoM and 2.9% YoY, while core inflation is expected at 3.2%. Any upside surprise could reignite stagflation fears, complicating the Fed’s easing path and potentially halting EUR/USD’s advance. Conversely, softer prints would cement expectations for aggressive cuts, which could push the pair toward 1.1830 and 1.1900.

Geopolitical Context and Dollar Dynamics

Geopolitical risk continues to weigh on the dollar. Russia’s largest air assault in three years on Ukraine over the weekend highlighted ongoing tensions, while Trump confirmed European leaders will meet in Washington this week to discuss the conflict. These developments add layers of uncertainty, favoring the euro as a counterweight to dollar weakness. Meanwhile, the U.S. Dollar Index (DXY) trades near 97.51, down 0.22%, reflecting broad selling pressure.

Market Verdict on EUR/USD

With EUR/USD holding firmly above 1.1700 and momentum aligning with dovish Fed expectations, the bias remains bullish. Near-term targets stand at 1.1780–1.1830, with scope to extend toward 1.1900 if U.S. CPI confirms cooling inflation. However, risks from French politics and stronger inflation data remain real. Based on current conditions, EUR/USD is rated a Buy, with pullbacks into 1.1700–1.1675 seen as opportunities to re-enter long positions.

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