EUR/USD finds a cushion near 1.1030 with US NFP in focus

• EUR/USD finds a temporary cushion near 1.1030 amid a slight correction in the US dollar.
• The US dollar falls as US ISM manufacturing PMI data signaled a contraction in activity for the fifth consecutive month.
• Investors await US JOLTS Job Openings data for July.

EUR/USD is finding buying interest in Wednesday’s European session after hitting a fresh two-week low near 1.1025 on Tuesday. The major currency pair gains as the US dollar (USD) corrects after the release of US (US) ISM manufacturing PMI data for August. The US dollar index (DXY), which tracks the greenback against six major currencies, is down near 101.60 after failing to recover from a two-week high of 102.00.

The ISM Manufacturing PMI, released on Tuesday, came in at 47.2, missing estimates of 47.5 but improving from an eight-month low of 46.8. Despite the slight improvement, markets saw the overall trend as pointing to a slowdown, as a reading below 50.0 suggests a contraction in manufacturing activity.

Amid a heavy data week, investors are eagerly awaiting US non-farm payrolls (NFP) data for August due out on Friday. Official labor market data will shape the path of the Federal Reserve’s (Fed) interest rate cut for September. Investors appear confident that the Fed will begin cutting its key lending rates this month, but are divided on the size of that potential rate cut.

The importance of the labor market data increased significantly after Fed Chairman Jerome Powell’s comments at the Jackson Hole (JH) Symposium, which signaled that the central bank is very concerned about weakening labor demand.

For more information on the current state of the labor market, investors will also focus on the US JOLTS Job Opening data for July and the ADP Employment Change data for August, which will be released at 14:00 GMT and on Thursday, respectively .

The US JOLTS Job Openings report is expected to show that employers posted 8.1 million new job openings, down slightly from 8.184 million a month earlier.

Daily market reasons: EUR/USD rises as US dollar corrects

• EUR/USD recovers slightly in European trading hours amid a gradual correction in the US dollar. The short-term outlook for the euro (EUR) remains weak as market participants expect the European Central Bank’s (ECB) policy easing cycle to be aggressive given the steep decline in eurozone inflationary pressures and economic growth weak
• Economists at Bank of America (BofA) said in their latest eurozone report: “In 2025/26 we still see more tapering than markets are pricing in, with a return to a 2% deposit rate by 3Q25 (the later) and to 1.5% in 2026″. BofA said Europe’s recovery remains fragile and likely to be shallow, pressured by several economic factors, such as slowing growth in China, as well as politics.
• ECB officials also remain concerned about rising risks to euro zone economic growth. Piero Cipollone, a member of the ECB’s Executive Board, said in an interview with a French newspaper that there is a real risk that our stance will become too restrictive,” adding that “we must ensure that inflation converges to our target without stopping the economy unnecessarily. “, Reuters reported.
• On the economic front, investors await July eurozone retail sales data due on Thursday. Economists forecast retail sales rose 0.1 percent, after contracting 0.3 percent in June, both monthly and annually. A slight improvement in retail sales would be insufficient to ease market speculation that the ECB will resume its policy easing cycle this month, which it started in June after a pause in July.
• In today’s session, investors will focus on Eurozone producer price index (PPI) data for July, which will be released at 09:00 GMT. The PPI report is expected to show that factory-gate prices of goods and services deflated at a slower pace of 2.5 percent from 3.2 percent in June. A sharp deflation in producer prices indicates a sharp slowdown in global demand. This would raise expectations of an ECB interest rate cut in September.

Technical Analysis: EUR/USD Struggles for Firm Position Near 20-Day EMA

EUR/USD is recovering slightly after hitting a new two-week low near 1.1025. The major currency pair’s short-term outlook is uncertain as it struggles to gain a firm foothold near its 20-day exponential moving average (EMA) around 1.1020.

The longer-term outlook is still bullish as the 50-day and 200-day EMAs at 1.0964 and 1.0850, respectively, are on the higher slope. The shared currency pair also holds the breakout of the Rising Channel on a daily time frame.

The 14-day Relative Strength Index (RSI) dipped below 60.00 after turning overbought near 75.00.

On the upside, the recent high of 1.1200 and the July 2023 high at 1.1275 will be the next stop for Euro bulls. Meanwhile, the downside is expected to remain cushioned near the psychological support of 1.1000.