EUR/USD Forecast: Fed Rate Cuts and Eurozone Stability Shape Market Dynamics

The EUR/USD currency pair is currently trading around 1.1670, supported by a rising trendline from late August and maintaining positions above key moving averages—the 50-EMA at 1.1659 and the 200-EMA at 1.1656. Despite facing selling pressure earlier in the week, the euro has shown resilience, with traders now closely monitoring upcoming U.S. labor data for further direction.

USD Price Forecast – Fed Cut Bets Drive Outlook as Euro Holds 1.1670

Recent U.S. labor statistics have raised concerns about the strength of the dollar. The ADP private payrolls report indicated only 54,000 jobs were added in August, significantly lower than the revised 106,000 from July and below the expected 65,000. Additionally, weekly jobless claims rose to 237,000, the highest since June. These figures have led to a heightened expectation of a 25-basis-point rate cut by the Federal Reserve at its September meeting, with market pricing reflecting a 99.4% probability of this outcome.

FTSE finishes in the red as US jobs report ups rate cut case

The Federal Reserve's potential rate cuts contrast sharply with the European Central Bank's (ECB) stance, which is expected to maintain interest rates at 2.00% during its upcoming meeting on September 10. The ECB's decision comes amid slowing growth in the Eurozone, with Q2 GDP projected at just 0.1%. This divergence in monetary policy is likely to enhance the euro's appeal if the Fed cuts rates aggressively while the ECB remains steady.

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On the technical front, EUR/USD is forming a bull pennant pattern, suggesting a potential breakout if resistance levels are cleared. Immediate resistance is noted at 1.1682, with further levels at 1.1708 and 1.1735. A decisive move above these thresholds could lead to a rally towards 1.2000. Conversely, support is anchored at 1.1614 and deeper at 1.1578. The upcoming nonfarm payrolls report is anticipated to be a critical driver, with consensus expectations for 75,000 jobs added and an unemployment rate of 4.3%.

USD Price Forecast – Fed Cut Bets Drive Outlook as Euro Holds 1.1670

The trajectory of EUR/USD into September hinges on the interplay between U.S. labor data and central bank policies. A weaker-than-expected jobs report could accelerate dollar losses, pushing EUR/USD through resistance levels, while a stronger report might re-anchor the pair closer to its support zone. Analysts are also noting that global risk appetite has shifted favorably towards the euro, with easing U.S. yields further undermining the dollar's strength.

USD Price Forecast – Fed Cut Bets Drive Outlook as Euro Holds 1.1670

Federal Reserve officials, including John Williams and Austan Goolsbee, have indicated that the labor market's deterioration could prompt a cautious approach to rate cuts. Meanwhile, the ECB remains committed to maintaining its current rates, with market expectations suggesting no changes until March 2026.

USD Price Forecast – Fed Cut Bets Drive Outlook as Euro Holds 1.1670

• “Expectations for the Budget are so gloomy, there is scope for upside surprises.” — Laurence Mutkin, BMO

2025 Forecast: Pound Sterling to Struggle Against Euro but Gain on Dollar

In summary, the EUR/USD pair's future movements will be significantly influenced by the upcoming U.S. labor data and the contrasting monetary policies of the Fed and ECB. The interplay of these factors will determine whether the euro can maintain its upward momentum against the dollar.

USD Price Forecast – Fed Cut Bets Drive Outlook as Euro Holds 1.1670