EUR/USD Price Forecast – Fed Cuts Shaping Trend as Euro Holds 1.1670

EUR/USD Holds Near 1.1670 as Traders Brace for Fed Cut Bets

The EUR/USD pair is locked in a critical range, trading around 1.1670, supported by a rising trendline from late August and holding above the 50-EMA at 1.1659 and the 200-EMA at 1.1656. Despite three consecutive sessions of selling pressure earlier this week, the euro has managed to recover intraday, keeping the bias tilted toward upside while awaiting confirmation from U.S. labor data.

Weak U.S. Jobs Data Reshapes Dollar Outlook

The dollar’s recent strength has been undermined by increasingly fragile labor readings. ADP private payrolls showed just 54,000 jobs in August, sharply lower than July’s revised 106,000 and well below expectations of 65,000. Weekly jobless claims also rose to 237,000, the highest since June. These numbers have solidified market conviction of a September rate cut, with CME FedWatch now pricing a 99.4% chance of a 25-basis-point reduction. The broader U.S. Dollar Index (DXY) is stabilizing near 98.13, but downside risks remain should nonfarm payrolls confirm the slowdown.

Fed Policy Under Spotlight as Inflation Still Elevated

While rate cut bets dominate, inflation remains sticky. Core CPI above 3% and Core PCE at 2.9% keep the Fed cautious about how far and how fast it can ease. Fed officials such as John Williams have suggested gradual cuts are possible, while Austan Goolsbee flagged a “live” September meeting due to deteriorating labor conditions. Markets are currently projecting at least three cuts by year-end, but the balance between weakening jobs and still-firm inflation leaves EUR/USD highly sensitive to Fed communications.

ECB Policy Steady as Eurozone Growth Slows

The European Central Bank (ECB) provides a contrasting backdrop, with its ECB Watch Tool showing an 83.8% probability of rates staying at 2.00% at the September 10 meeting. Growth has slowed—Q2 GDP is expected at 0.1%, down from 0.6% in Q1—but policymakers have signaled stability rather than fresh easing. This divergence means that if the Fed cuts aggressively while the ECB holds steady, euro-denominated assets could gain relative appeal, lending medium-term support to EUR/USD.

Technical Structure Shows Bull Pennant and Inverse Head-and-Shoulders

Chart patterns are reinforcing bullish potential. On the daily timeframe, EUR/USD is forming a bull pennant, consolidating gains since August in a symmetrical triangle that often resolves higher. On shorter-term charts, an inverse head-and-shoulders has developed, pointing to a potential breakout if resistance levels are cleared. Immediate resistance sits at 1.1682, followed by 1.1708 and 1.1735. A decisive move above these thresholds could open the door for a run toward 1.2000, where structural supply sits. Support is anchored at 1.1614 and deeper at 1.1578, the 23.6% Fibonacci retracement.

Market Volatility Expected Around NFP Print

The nonfarm payrolls release is the pivotal driver in the immediate term. Consensus is for 75,000 jobs and unemployment at 4.3%, but revisions and wage growth will matter as well. Average Hourly Earnings are projected at 3.7% YoY, down from 3.9%, with monthly growth at 0.3%. A weaker-than-expected print would likely accelerate dollar losses and push EUR/USD through resistance, while a surprise beat could stall momentum and re-anchor the pair closer to 1.1610–1.1630 support.

Cross-Market Dynamics Add to Euro Strength

Global risk appetite has also been leaning toward the euro. German and French 30-year yields have retreated from recent highs, calming fears of European bond instability, while easing U.S. yields continue to undermine the dollar’s edge. Traders have noted the euro’s outperformance in the currency heatmap, where it has gained broadly across majors. Comparisons with other pairs—such as GBP/USD consolidating at 1.3454 and USD/JPY testing resistance near 149.23—show EUR/USD in a stronger technical setup, particularly as the euro represents 57.6% of the DXY basket.

Forecast for EUR/USD in the Coming Sessions

With EUR/USD consolidating near 1.1670 and holding its bullish chart formations, the balance of risk favors an upside breakout if U.S. labor data confirms weakness. A sustained move through 1.1720–1.1735 would invite momentum traders, with potential extensions toward 1.1850 and eventually 1.2000. However, if NFP surprises and the Fed remains more cautious than expected, EUR/USD could retreat back into the 1.1575–1.1610 zone. The pair’s trajectory into September hinges on this policy divergence: a Fed ready to cut against an ECB holding steady creates conditions for euro appreciation, but only if economic data aligns.

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