The EURUSD currency pair saw a pullback after a weaker than expected Non-Farm Payroll (NFP) report. The USD was widely sold off because traders anticipated a more positive report. This change has led the market to now expect 59 basis points of easing by the end of the year, up from 35 basis points before. Fed officials like Williams and Daly have suggested a possible rate cut in September. This makes it likely that Fed Chair Powell will hint at a similar decision during the Jackson Hole Symposium. On the EUR side, there haven’t been significant updates since the US-EU trade deal, which set tariffs at 15%. The European Central Bank (ECB) is neutral about rate cuts but would consider them if it sees notably negative data. Currently, the market is expecting a 14 basis point easing by year-end, indicating a 50% chance of another rate cut.

Technical Analysis

Looking at the EURUSD daily chart, resistance is found at the 1.1575 level, with the possibility of a drop to 1.1065 if sellers take control. On the 4-hour chart, sellers are relying on this resistance to push for lower prices. The 1-hour chart shows minor support at the 1.15 level, where buyers might aim to break above 1.1575, while sellers watch for further declines. Upcoming events include the US ISM Services PMI today and US Jobless Claims reports on Thursday. There is a noticeable change in sentiment towards the US dollar following last week’s jobs report. The Non-Farm Payrolls for July 2025 reported only 150,000, far less than the expected 220,000. This has prompted traders to quickly factor in Federal Reserve rate cuts before the year ends. Now, the market anticipates almost 60 basis points in cuts by December—a significant move from just 35 basis points prior to the report. This rapid adjustment is reminiscent of late 2023 when traders pre-emptively expected early rate cuts in 2024. It suggests that any strong economic data could lead to a swift reversal.

European Central Bank Policy

On the other hand, the European Central Bank is taking a wait-and-see approach, remaining neutral on its policy. With Eurozone inflation stubbornly at 3.1% last month, they need to see a substantial drop in inflation before considering further cuts. This divergence in central bank policies is the main factor driving the EURUSD higher. A crucial technical level to watch is 1.1575, which has halted rallies twice in the past quarter. For traders believing this resistance will hold, buying inexpensive, short-term put options below the 1.1500 support provides a way to bet on a reversal with limited risk. This strategy guards against a sudden spike fueled by more weak US data. However, if the price breaks above 1.1575, it would signal a new bullish trend, possibly reaching the 1.1700 level, a point not seen since early 2022. Traders might consider call options to prepare for this breakout while keeping risk minimized. All eyes will be on today’s ISM Services PMI and Thursday’s Jobless Claims to determine if the weak jobs data was an isolated incident. Create your live VT Markets account and start trading now.

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