Euro Holds Steady Above 1.16 as Traders Eye Upcoming US Jobs Report

The EUR/USD pair remained largely unchanged around 1.1625 during early Asian trading on Friday, with market participants holding off on making significant moves until the release of key U.S. employment data later in the day. Investors are particularly focused on how the August jobs report might influence expectations for Federal Reserve monetary policy.

Federal Reserve Governor Christopher Waller indicated on Thursday that he supports maintaining current interest rates at the Fed’s September meeting, contingent on upcoming inflation figures remaining benign. His cautious approach contrasts with the more hawkish tone expressed by former Fed official Kevin Warsh the previous week, adding some uncertainty to rate projections.

Following Waller’s remarks, market-implied odds of a rate cut at the September Fed meeting declined, with traders now assigning only a 50.2% probability to such an outcome, down from 63.2% earlier in the week, according to the CME FedWatch Tool. Despite this shift, all attention remains fixed on the upcoming U.S. labor market data, which could provide renewed directional impetus for the dollar.

Economists forecast that the U.S. economy added approximately 57,000 jobs in August, with the unemployment rate expected to remain stable at 4.1%. Should these figures show unexpected strength, it could bolster the greenback against the euro in the short term. Meanwhile, across the Atlantic, expectations are mounting that the European Central Bank will implement another rate hike at its September gathering—the second increase in what is anticipated to be the ECB’s briefest tightening cycle in over a decade.

ECB Rate Path Fuels Renewed Bullish Sentiment Toward Euro

According to strategists at Scotiabank, eurozone interest rate outlooks have become notably more aggressive in recent days, reflecting growing confidence that policymakers may deliver further tightening. Markets are now pricing in more than the previously anticipated 25 basis points of hikes for September, with nearly an additional full 25-basis-point move projected by year-end. This evolving landscape is helping prop up the euro, as yield differentials increasingly favor the shared currency. Analysts highlight that the two-year Germany-U.S. yield spread stands at around 1.1623, supporting the view that the euro is trading close to its fair value amid shifting rate expectations.

Waller Signals Data-Dependent Approach Ahead of September Decision

In a speech delivered on Thursday, Fed Governor Waller struck a balanced tone, suggesting that while there are early signs of disinflation, the central bank remains vigilant. His comments scored moderately hawkish on the FXS Speechtracker scale, though slightly below historical averages, indicating a subtle softening in rhetoric. Waller emphasized that any decision in September would hinge heavily on incoming economic data, particularly inflation trends. A surprise uptick in prices could reignite discussions about raising rates, whereas continued moderation would likely support leaving policy unchanged. He also noted solid economic growth and a resilient labor market as key factors influencing his perspective.

The FXS Fed Sentiment Index dropped by 2.06 points to 125.38 following Waller’s speech, reflecting a minor recalibration in perceived hawkishness among investors. While the index remains comfortably above neutral territory, the slight decline underscores growing conviction that underlying inflation pressures are easing. Nonetheless, Waller’s conditional stance keeps the door open for future adjustments depending on macroeconomic developments.

EUR/USD Technical Outlook Remains Positive Above Key Moving Average

From a technical standpoint, the EUR/USD pair continues to exhibit bullish tendencies, trading above its 100-day simple moving average (SMA). With the Relative Strength Index (RSI) hovering near 57, momentum stays positive but not overly stretched, suggesting room for consolidation before resuming upward movement. Traders appear confident in the pair’s ability to sustain gains within the context of longer-term support levels.

To the upside, immediate resistance looms at the 100-day SMA near 1.1565, followed by the upper Bollinger Band around 1.1712, where selling pressure may emerge. On the downside, crucial support comes in at the Bollinger midline around 1.1610, with deeper downside targeting the lower band near 1.1505 if breached.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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