EUR/USD Price Steadies at 1.1760 as Dollar Weakens, ECB and CPI Loom

EUR/USD Reclaims 1.1760 Amid Dollar Weakness and Fed Cut Bets

The EUR/USD pair is consolidating near 1.1760, sustaining momentum after hitting an intraday high of 1.1780 and pulling back from resistance. The euro has now climbed more than 1.3% in September, rebounding from the July low at 1.1400, with buyers regaining control as the U.S. dollar weakens. The Dollar Index (DXY) trades at 97.40, under pressure from dovish expectations that the Federal Reserve will start easing aggressively at the September 16–17 meeting.

Fed Easing Odds Shape the Dollar Narrative

Labor market softness is the catalyst undermining the greenback. The Bureau of Labor Statistics revised U.S. jobs down by 911,000 for the year through March, the largest downward revision since 2009. August nonfarm payrolls confirmed the cooling trend with just 22,000 jobs added, while unemployment rose to its highest since 2021. Futures markets now price a 90% probability of a 25 bps rate cut and 10% chance of a 50 bps cut this month, according to CME FedWatch. Lower yields and a dovish Fed outlook are eroding support for the dollar, pushing traders into the euro and other majors.

ECB Policy Steady as Inflation Anchors

In contrast, the European Central Bank is expected to hold rates steady for a second consecutive meeting. Inflation has remained at the 2% target for three months, and policymakers are cautious given the eurozone’s exposure to trade disputes and sluggish industrial output. Still, the absence of further easing gives the euro a relative advantage against a weakening U.S. dollar. Thursday’s ECB meeting is critical for confirming this stance, as markets await any signal about balance sheet adjustments or forward guidance.

French Political Crisis Raises Tail Risks

Politics in Europe remain a variable. In France, Prime Minister François Bayrou faces a no-confidence vote, and President Emmanuel Macron may be forced to appoint his fifth prime minister in under two years. While markets have treated French instability with relative calm so far, the eurozone’s second-largest economy entering deeper political gridlock could weigh on sentiment. The precedent of December’s dismissal of Barnier’s government suggests eurozone stability can hold, but rising risks keep speculative traders cautious.

Technical Structure: Fibonacci and Trendline Supports

From a technical perspective, EUR/USD is pressing against the 1.1748 Fibonacci retracement, which capped rallies in both August and early September. A clean breakout above this level opens the way toward 1.1820 and the July swing high at 1.1830, while a sustained move higher would put the 1.2000 psychological level back on the radar. On the downside, support holds at 1.1744, with stronger cushions at 1.1709 and 1.1686, aligned with the 50-EMA and prior swing highs. Failure to defend 1.1700 exposes 1.1650–1.1590, levels that mark the bottom of the summer range. Momentum indicators are moderately bullish: RSI at 56 signals room for further gains, while the daily structure continues to show higher lows since August.

Macro Crosscurrents: CPI and Producer Prices Next

Traders are preparing for two data points that could reset positioning: U.S. PPI on Wednesday and CPI on Thursday. Consensus sees headline CPI rising to 2.9% from 2.7%, with core above 3%, a dynamic that complicates the Fed’s path. Stronger-than-expected inflation data would challenge aggressive easing bets, potentially lifting the dollar and halting euro gains near resistance. Conversely, if inflation underperforms, EUR/USD could accelerate beyond 1.1820, with scope to retest 1.20 in the coming weeks.

Market Sentiment and Positioning

Order flow shows buyers dominating short-term horizons. Retail positioning is leaning bullish after last week’s payroll disappointment, but institutional traders remain cautious, favoring call spreads rather than outright longs. Options data reveals heavier open interest at the 1.1800 and 1.1850 strikes, suggesting markets expect tests of these levels but lack conviction for a breakout. Meanwhile, leveraged funds remain net short euros, though covering positions has fueled much of the recent rally.

Verdict on EUR/USD

The structure favors a bullish tilt as long as 1.1700 holds, with momentum aligned toward 1.1820–1.1830. A breakout through those levels would likely carry to 1.20, supported by Fed easing, weak U.S. labor markets, and relative ECB stability. The risks are clear: stronger U.S. inflation could rein in euro gains, and French political shocks remain a wildcard. On balance, based on data, policy divergence, and technical signals, EUR/USD is a Buy, with pullbacks to 1.1710–1.1730 presenting accumulation opportunities and upside targets at 1.1820 and 1.2000.

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