EUR/USD Forex Signal: Sits and Waits for the NFP Data

Bearish view

• Sell the EUR/USD pair and set a take-profit at 1.0785.
• Add a stop-loss at 1.0885.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0830 and a take-profit at 1.0900.
• Add a stop-loss at 1.0785.

The EUR/USD pair wavered after the flash European inflation data and the relatively dovish Federal Reserve interest rate decision. The pair was trading at 1.0830, a few points above this week’s low of 1.0800.

European inflation and Fed decision

The EUR/USD rose after a report by Eurostat published strong European inflation data. The data revealed that the bloc’s inflation rose from 2.5% in June to 2.6% in July, higher than the median estimate of 2.5%.

Core inflation, which excludes the volatile food and energy prices, rose to 2.9% in July, beating the consensus estimate of 2.8%. These numbers mean that the bloc’s inflation was moving in the opposite direction.

As a result, there is a possibility that the European Central Bank (ECB) may pause its interest rate cuts as it observes the boc’s inflation trends. The bank has already delivered its first cut and its September reduction is now hanging in balance.

Meanwhile, in the United States, the Federal Reserve decided to leave interest rates at a two-decade high of between 5.25% and 5.50%. In his statement, the Fed Chair pointed that a rate cut in September was possible.

He said that the bank was focusing on the bloc’s dual-mandate. The inflation side of this mandate has continued improving in the past few weeks. Recent data showed that the Personal Consumption Expenditure (PCE) retreated to 2.5% and is nearing the bank’s target of 2.0%.

However, there are signs that the labor market is softening. Data by ADP showed that the economy created just 122,000 private sector jobs in July. Economists expect Friday’s nonfarm payroll report to show that the unemployment rate rose to 4.2% in July.

If these numbers are accurate, the Fed will likely start cutting rates as soon as in its September meeting.

EUR/USD technical analysis

The EUR/USD pair has continued its downward trend in the past few days. It bottomed at 1.0800 this week, its lowest point since July 4.

It has formed a descending channel pattern that has a close resemblance to a falling wedge. The pair has remained below the 50-period moving average and was between the 38.2% and 50% Fibonacci Retracement point.

Therefore, the pair will likely remain in this range on Thursday as traders wait for the NFP data. The key support and resistance levels to watch will be at 1.0800 and 1.0900.

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