The EUR/USD pair bounced to weekly highs near the 1.1100 hurdle as the US Dollar faced renewed selling pressure due to disappointing results in the US labour market. The Dollar Index (DXY) flirted with four-day lows near 101.20 after JOLTs Job Openings missed expectations in July, signaling further easing in the labour market and potentially setting the stage for a larger interest rate cut by the Federal Reserve in September.
Investors are now focused on hints about the size of the expected rate cut by the Fed following comments by Fed Chair Jerome Powell at the Jackson Hole event. Powell indicated a possible adjustment in monetary policy and emphasized the importance of not letting the labour market cool further.
On the other side of the Atlantic, the European Central Bank (ECB) is considering a rate cut in September, with growing divisions among policymakers regarding the economic outlook. Lower-than-expected inflation data in Germany and the Eurozone could pave the way for a rate cut by the ECB at its meeting on September 12.
Speculators have increased their net long positions in the Euro, while commercial players have boosted their net short positions, indicating a potential shift in market sentiment towards the Euro.
EUR/USD Technical Outlook
In the short term, the EUR/USD pair is expected to challenge resistance levels at 1.1201, 1.1275, and 1.1300. On the downside, support levels are seen at 1.0910, 1.0881, and 1.0854.
The pair’s upward trend is likely to continue as long as it remains above the 200-day SMA. In the four-hour chart, initial resistance is at 1.1095, with support at 1.1026 and 1.0978.
In summary, the policy gap between the Fed and the ECB could narrow if the Fed implements additional rate cuts, potentially benefiting the EUR/USD pair. However, the long-term outperformance of the US economy compared to Europe could limit prolonged weakness in the Dollar.