EUR/USD Forecast: Forex Analysis for Friday, September 5, 2025
Original article by Matt Weller, FOREX.com
Rewritten and expanded for clarity and depth.
Overview
The EUR/USD pair has encountered significant volatility in recent sessions, reacting to market-moving events from both sides of the Atlantic. As we conclude the first week of September trading, the focus turns heavily to upcoming macroeconomic data and its potential impact on central bank policy decisions. Investors are keenly watching key economic indicators from the U.S. and Eurozone, which will play a pivotal role in determining short-term direction for the euro versus the dollar.
Currently, the currency pair is fluctuating within a moderately bearish channel, influenced by persistent U.S. dollar strength, prospects of interest rate differentials favoring the Federal Reserve, and weaker-than-anticipated European economic developments. The following breakdown offers a comprehensive analysis of the key themes shaping EUR/USD price action heading into Friday, September 5, 2025.
Macroeconomic Background
The primary drivers of the EUR/USD pair continue to be interest rate expectations and macroeconomic disparity between the United States and the Eurozone:
United States
– Labor Market Strength:
– The U.S. continues to post solid employment figures.
– Non-farm payrolls remain strong, with recent updates showing consistent monthly additions exceeding 200,000 jobs.
– Unemployment rate is stable around 3.7%, indicating tight labor market conditions.
– Inflation Dynamics:
– Core inflation has cooled slightly but remains above the Federal Reserve’s target of 2%.
– Consumer Price Index (CPI) figures show a year-over-year headline inflation rate around 3.4%.
– Federal Reserve Outlook:
– Despite signs of modest disinflation, the Fed has maintained a hawkish tone.
– Policymakers continue to suggest that one more rate hike may be warranted before year-end, depending on incoming data.
– Market participants price in a roughly 60% chance of one final 25 basis point hike by December 2025.
Eurozone
– Economic Weakness:
– Growth in the Eurozone has decelerated notably in recent months.
– Germany, the bloc’s largest economy, is flirting with recessionary territory, with Q2 growth revised down to -0.2%.
– Consumer spending and industrial production remain sluggish across the zone.
– ECB Policy Stance:
– The European Central Bank has adopted a more cautious tone.
– While inflation hovers near 2.9%, policymakers are increasingly concerned about stifling already-weak growth.
– Current market pricing anticipates that the ECB will hold rates steady through the remainder of 2025 unless a sharp inflation spike changes the calculus.
– Inflation vs. Growth Trade-off:
– The ECB is navigating a tightrope between maintaining price stability and avoiding a deeper downturn.
– Forward guidance has shown signs of dovish shifts, reinforcing weakness in the euro.
Technical Analysis: EUR/USD Price Action
From a technical perspective, EUR/USD has gravitated towards a descending pattern after peaking near 1.1050 earlier this year. Bearish momentum has dominated through the second half of Q3 2025.
Current Chart Patterns
– Support and resistance zones:
– Immediate resistance is found near 1.0850, the peak of the most recent bullish retracement.
– Strong support lies around the 1.0700 psychological threshold, a level last tested in late August.
– Moving Averages:
– The 50-day moving average is currently sloped downward and sits around 1.0840, providing dynamic resistance.
– The 200-day moving average hovers close to 1.0920, indicating long-term resistance pressure.
– RSI (Relative Strength Index):
– On the daily chart, RSI stands at approximately 45, suggesting neutral to slightly bearish momentum.
– Momentum indicators do not show signs
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