EUR/USD Outlook: Dollar Rebounds Ahead of Key US Jobs Data

• The EUR/USD outlook suggests a rebound in the dollar after it ended August down.

• The dollar recovered as traders anticipated crucial US employment data. 

• Isabel Schnabel said rates should remain steady.

The EUR/USD outlook suggests a rebound in the dollar after it ended August down. The recovery comes ahead of the all-important US nonfarm payrolls report and could only be brief, given the elevated levels of Fed rate cut expectations. Meanwhile, ECB comments showed officials were comfortable keeping rates steady. 

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The dollar recovered from lows hit in the previous session as traders anticipated crucial US employment data. However, experts believe the rebound might only be brief, as recent data has pointed to economic softness. 

“Already, the labour market is softening, and Chair Powell has signalled the possibility of rate cuts at Jackson Hole,” the analysts wrote. “This means that the overvalued USD could ease again as markets anticipate coming Fed rate cuts.”

If employment figures for August are also poor, the greenback could reach fresh lows. At the same time, bets on a Fed rate cut would surge. 

Meanwhile, the ECB is in no hurry to resume rate cuts. Isabel Schnabel said rates should remain steady since the Eurozone economy has shown resilience despite US tariffs. At the same time, she noted that inflation could come in higher in the futures. 

Notably, Eurozone manufacturing business activity expanded for the first time in 3 years, further supporting the case for steady interest rates.

EUR/USD key events today

• ISM Manufacturing PMI

EUR/USD technical outlook: Bears dominate within the consolidation

On the technical side, the EUR/USD price has made a sharp bearish move, breaking below the 30-SMA. This indicates a shift in sentiment. At the same time, the RSI has broken below 50, suggesting solid bearish momentum. Still, on a larger scale, EUR/USD remains in a consolidation between the 1.1600 support and the 1.1725 resistance levels. 

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The price recently retested the range resistance before making the steep drop. With bears now in the lead, EUR/USD might soon retest the range support. 

A break below the level would suggest solid bearish momentum and likely mark the start of a downtrend. It would allow bears to revisit the 1.1400 key support level. On the other hand, if the level holds firm, the price will remain in a consolidation phase.

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