Title: EUR/USD Gains Ground Ahead of U.S. Non-Farm Payrolls Amid Improved Market Sentiment
Source: Adapted from article by Flavio Tosti on FXStreet (Original article link: https://www.fxstreet.com/news/eur-usd-picks-up-amid-a-brighter-sentiment-ahead-of-the-us-nfp-release-202509050742)
The EUR/USD currency pair started to climb steadily on Wednesday, supported by a brighter market sentiment and growing optimism from investors ahead of Friday’s highly anticipated U.S. Non-Farm Payrolls (NFP) report. This uptick in the euro against the dollar represents modest progress as the trading community watches for key employment data that could sway Federal Reserve policy in the coming months.
Market participants have regained confidence following an extended period of cautious trading driven by central bank uncertainty and global economic instability. Despite sustained pressure from a broadly stronger U.S. dollar over the past month, recent developments suggest a potential for a mild EUR/USD recovery, at least in the near term.
Here’s an in-depth analysis of the factors currently shaping EUR/USD price movements and what lies ahead for traders and investors.
EUR/USD Rebounds as Sentiment Improves
The euro saw moderate gains in Wednesday’s European session, rising to 1.0780 levels after bottoming out near 1.0725 earlier in the week. The risk-on sentiment across equity and bond markets has buoyed the common currency as traders recalibrate their positions ahead of the U.S. employment report.
Several elements helped push the pair upward:
– Global stock markets rallied, reflecting improved investor confidence.
– European government bond yields rose modestly, supporting the euro.
– Softer-than-expected U.S. economic data released earlier in the week suggested the Fed might maintain a cautious tone.
– Technical support at the 1.0725 range held firm, halting the euro’s retreat and signaling a possible near-term reversal.
Market perception has shifted, with some traders now believing the U.S. labor market could show signs of cooling. This belief, if supported by Friday’s report, might ease pressure on the Federal Reserve to maintain its current path of higher interest rates.
Eyes on U.S. Non-Farm Payrolls
Every month, the U.S. NFP report provides a high-impact snapshot of employment trends in the world’s largest economy. This week’s edition, scheduled for release on Friday, holds particular significance. Federal Reserve policymakers have consistently emphasized “data dependency” as a key driver behind rate policy decisions. As such, deviations from expectations in the NFP figures can dramatically sway market sentiment.
Expectations for the NFP report include:
– Consensus estimate of about 170,000 new jobs added in August.
– Unemployment rate forecast to remain steady at 3.5 percent.
– Average hourly earnings projected to rise 0.3 percent month-over-month.
If the data comes in below expectations, market speculation could increase regarding a potential Fed pause or even a pivot to policy easing if economic activity weakens further. Conversely, a strong report would reinforce the Fed’s current trajectory of maintaining elevated interest rates to curb inflation.
Technical Analysis: EUR/USD Levels to Watch
From a technical perspective, EUR/USD remains trapped in a wider bearish channel, but the pair has recently shown signs of short-term stabilization. Most of the action has hovered around the 1.0750 mark, which appears to represent a newfound area of key support.
Important levels to observe:
Support levels:
– 1.0725: Recently established near-term support; coincides with this week’s low.
– 1.0650: Intermediate support that aligns with the lower boundary of recent consolidation.
– 1.0520: A more robust base from June price action.
Resistance levels:
– 1.0785: A horizontal resistance level based on recent highs.
– 1.0830: 100-day Simple Moving Average (SMA), which may act as medium
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