Key Takeaways:
- US Labor Market Data: The upcoming NFP report will be pivotal. A weaker-than-expected jobs report could further weaken the US Dollar, while a strong report could lead to a correction in EUR/USD.
- Technical Levels: Resistance at 1.0800-1.0815 and support at 1.0665 will be crucial in determining the pair’s direction.
- Fed Rate Cut Speculation: Market expectations for a September rate cut by the Fed are influencing US Dollar movements. Inflation data will be key in shaping these expectations.
- French Elections: The left-wing victory has provided support to the Euro by reducing political uncertainty in France.
Market Dynamics and Recent Performance
The EUR/USD pair edged higher and managed to close above the 1.0800 level last week. This movement was influenced by the US Dollar staying on the back foot after the US Independence Day holiday and ahead of crucial US labor market data. The left-wing victory in the French elections provided additional support to the Euro, as it alleviated some market concerns about political instability in the Eurozone’s second-largest economy.
Technical and Fundamental Influences
Technically, EUR/USD remains within a familiar range, with resistance around the 1.0840-1.0855 area, around the 0.78 Fibonacci retracement of the recent decline. The pair found support at the 1.0665 level, a key area that has held firm in recent weeks. The pair’s price action is closely linked to US Dollar dynamics and broader market sentiment.
From a fundamental perspective, the outlook for the US Dollar in Q3 is mixed. Bearish forces are expected to prevail by the end of the quarter, with the Federal Reserve’s potential rate cut being a significant factor. Market participants are closely watching inflation data to gauge the likelihood of a rate cut in September. The left-wing victory in the French elections has provided a boost to the Euro, reducing political uncertainty in the region. However, the Euro’s strength will also depend on upcoming economic data and the European Central Bank’s policy stance.
Looking Forward
Looking ahead, the focus will be on the US Nonfarm Payrolls (NFP) report and its implications for the Federal Reserve’s policy. A weaker-than-expected jobs report could put further pressure on the US Dollar, while a strong report might lead to a correction in EUR/USD. Additionally, the outcome of the French elections has provided some relief to the Euro, but the market will also pay close attention to upcoming Eurozone economic data and ECB commentary.
