EUR/USD Surges as Weak U.S. Jobs Data Forces Fed Rate Cut Bets

The EUR/USD pair advanced sharply, hitting 1.1714 during Friday’s New York session after the U.S. nonfarm payrolls report revealed only 22,000 jobs created versus expectations of 75,000. The unemployment rate ticked higher to 4.3%, while wage growth stayed steady at 0.3% month-on-month. That combination triggered an aggressive sell-off in the dollar, with the U.S. Dollar Index (DXY) sliding 0.70% to 97.57 and U.S. 2-year yields collapsing to 3.50%, the lowest in five months. Traders have now priced a 100% probability of a 25-basis-point rate cut at the September 17 FOMC meeting and a 14% chance of a 50-basis-point cut, dramatically shifting sentiment in favor of the euro.

Political Pressures in Europe Complicate the Rally for EUR/USD

Even with dollar weakness driving momentum, the euro is facing its own headwinds from French political uncertainty. Elections looming in France have stirred volatility, with investors fearing policy paralysis or market disruptions depending on the outcome. Despite this, the euro gained ground after the Eurozone’s Q2 GDP revision showed annualized growth at 1.5%, slightly above expectations, while Germany’s DIW institute projected a modest 0.2% GDP improvement in 2025. Those data points suggest the European economy, while fragile, may be stabilizing, providing some support to the common currency.

DXY Breakdown Unlocks Room for Euro Upside

The DXY’s fall below its critical 97.70 support level marks a decisive technical break. That level had held since mid-August, and the failure opens a path toward the 96.70–96.80 zone. Such weakness in the dollar index is typically correlated with stronger EUR/USD flows. Friday’s nonfarm payrolls miss also tagged the unfinished July auction at 97.43, adding technical confirmation that bearish momentum in the dollar is broadening. Unless the DXY reclaims 98.00 in the coming sessions, EUR/USD has a clean runway toward retesting 1.1790–1.1829.

Technical Picture for EUR/USD Points Toward 1.1800 Resistance

On the charts, EUR/USD has broken decisively above its 22-day simple moving average, with the Relative Strength Index holding above 50, reinforcing bullish momentum. The pair printed a morning star formation around 1.1400 in early August before reclaiming upside traction. Now, the key test lies at the 1.1759–1.1800 zone, with a clean break exposing the year-to-date high at 1.1829. A failure at resistance could see a pullback toward 1.1650 and deeper to 1.1600, with major support at the 100-day SMA around 1.1526. For now, momentum favors continuation higher as long as EUR/USD remains above 1.1700 on a closing basis.

Macro Drivers Favor Euro Strength Over Dollar

Beyond the immediate labor data shock, broader macro dynamics are supporting EUR/USD. Softer U.S. inflation data last month fueled disinflation expectations, reducing the perceived impact of Trump’s tariffs on price growth. Traders now await fresh CPI and PPI reports next week, where another weak print will cement the case for multiple Fed cuts before year-end. Futures tied to December 2025 fed funds contracts already price in nearly 65 basis points of easing. Meanwhile, the ECB is widely expected to hold rates steady, with market probabilities showing a 91% chance of no move, leaving the policy divergence tilted against the dollar.

Long-Term Outlook Signals Bullish Continuation for EUR/USD

From a structural standpoint, EUR/USD’s rally from the 2022 low at 0.9534 remains intact, with the pair now eyeing the 1.1916 projection zone. Technical analysts highlight that the multi-decade downtrend could already be reversing, with the next major retracement level sitting at 1.2019. Sustained strength above 1.1829 would confirm the bullish case and open the way toward 1.20, with 1.3554 flagged as a long-term extension target if momentum persists. As long as support at 1.1604 holds, the risk bias remains to the upside.

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• The USD/JPY weekly forecast indicates further weakness in the US labor market.
• The US economy added only 22,000 jobs in August.
• Next week, the US will release its consumer and wholesale inflation reports.

The USD/JPY weekly forecast indicates further weakness in the US labor market, which supports a more dovish Fed.

Ups and downs of USD/JPY

USD/JPY ended the week bullish but closed well below its highs as the dollar dropped. At the start of the week, the dollar recovered briefly against the yen as traders awaited crucial US employment figures. However, as the data came in, it became clear that the labor market had softened more than expected.

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Nonfarm payrolls revealed that the US economy added only 22,000 jobs in August, compared to the forecast of 75,000. Meanwhile, the unemployment rate rose to 4.3% as expected. The poor figures increased expectations for Fed rate cuts, weighing on the dollar.

Next week’s key events for USD/JPY

Next week, the US will release its consumer and wholesale inflation reports, which will shape the outlook for Fed rate cuts. Already, market participants are fully pricing a rate cut in September. However, the outlook for future rate cuts is still changing. Moreover, there is a chance the Fed will opt to deliver a massive rate cut this month.

If consumer inflation comes in below estimates, rate cut expectations will increase, and the dollar will extend its decline. On the other hand, a positive figure could ease rate cut bets.

USD/JPY weekly technical forecast: Bears prepare to challenge the channel support

On the technical side, the USD/JPY price trades in a bullish channel with clear support and resistance lines. However, the price is also chopping through the 22-SMA, a sign that bears are showing strength. This also indicates that the move is corrective.

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Previously, the USD/JPY was trading in a well-developed downtrend, mostly staying below the 22-SMA. However, the decline paused when it reached the 140.01 key support level. Here, bulls took charge, making higher highs and lows. However, the new trend was shallow and corrective.

Within the bullish channel, the price has broken below the SMA, and the RSI has dipped below 50. Therefore, bears are currently stronger and could soon challenge the channel support. Given that the price is currently in a corrective move, a breakout would likely lead to an impulsive move. If bears break out of the channel, the price will fall to retest the 140.01 support level.

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USD/JPY Technical Analysis

The US dollar has plunged against the Japanese yen during the trading session like you would expect. But we are sitting right at the 50 day EMA and we’re still very much within the consolidation area that we have been in for quite some time. With that being the case, I think you’ve got a scenario where not much has changed again. And we’ve seen candlesticks like this recently. So, it’s really not until we break down below 146 yen that I think anything has changed here either.

AUD/USD Technical Analysis

The Australian dollar has rallied quite nicely, but again, it hasn’t really reached escape velocity. We have a much sloppier area to deal with here, with 0.66 offering resistance. If we were to break above there, then we can start to have a conversation about a much bigger move. Short-term pullbacks, I think, continue to be a very real possibility, but if we were to break above the top of the candlestick on Thursday, July 24, I think at that point, you really start to see the Australian dollar take off.

This will be a US dollar centric move. So, you’ll see the dollar fall apart everywhere. And then you’ll see it play out here, which the Australian dollar, for what it’s worth, has been a laggard.

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GBP/USD Pressured by Diverging Fundamentals

The pound is trading in volatile fashion against the dollar as GBP/USD hovers around 1.3515, rising 0.6% on the day after dismal U.S. labor data. Nonfarm payrolls added just 22,000 jobs in August compared with forecasts of 75,000, while unemployment ticked up to 4.3% from 4.2%. The weak jobs print sent U.S. 10-year yields tumbling 2% to below 4.1%, dragging the dollar index to its lowest since July at 97.50. This collapse in dollar momentum allowed sterling to reclaim levels above 1.35 despite deep concerns surrounding the UK’s fiscal position and sticky yields.

UK Fiscal Concerns Limit Sterling Upside

While the dollar’s slump has temporarily lifted GBP/USD, investors remain cautious about the UK outlook. Thirty-year gilts recently touched their highest yield since 1998, reflecting market worries about Britain’s debt trajectory ahead of the November budget. Sterling peaked near $1.38 in July, but analysts expect sideways trade below 1.35 in the short term as fiscal risks cap bullish attempts. The market currently sees just an 18% chance of a Bank of England cut in November compared with 67% one month earlier, showing how sharply rate expectations have shifted with yields projected to stay higher than peers for longer.

U.S. Labor Weakness Reframes Fed Policy Bets

The weak NFP print has reshaped expectations for the Federal Reserve, with CME FedWatch showing 75% odds of consecutive 25-basis-point cuts in September and October. ADP data had already hinted at labor fragility with just 54,000 private-sector jobs added in August compared with 106,000 in July. Fed speakers have acknowledged risks, with Chicago’s Goolsbee highlighting deterioration in the job market, while New York’s Williams maintained that gradual easing remains an option if inflation allows. The dovish tilt is pulling the dollar lower across the board, but market positioning remains sensitive to every labor release.

Technical Picture for GBP/USD

On the charts, GBP/USD trades within a bearish channel but currently sits above its 30-period SMA with RSI above 50, signaling bulls are trying to seize momentum. A push through channel resistance could lift the pair toward 1.3575, confirming another impulsive move higher after the recent corrective phase. If momentum stalls, immediate support lies near 1.3416, followed by 1.3376 and 1.3341. Failure to defend those levels would re-expose the August low at 1.3142. On the topside, resistance zones cluster around 1.3489, then 1.3543, with a breakout targeting July’s 1.3789 peak.

Sterling’s Relative Strength Against Majors

The heat map of currency performance shows sterling was strongest against the dollar, gaining 0.66%, while only marginally weaker versus the euro at -0.09%. GBP also outperformed the Canadian dollar by 0.53% and gained 0.92% against the Australian dollar, underscoring how much dollar weakness drove the move. Despite this strength, sentiment remains fragile as traders recognize sterling’s rally is built more on U.S. weakness than UK strength. The UK’s fiscal risk premium means any rebound in dollar yields could quickly unwind recent gains.

Outlook for GBP/USD

Short-term dynamics are dominated by U.S. labor data and Fed policy bets. If the Fed confirms rate cuts in September and October, GBP/USD could extend toward 1.36–1.38, though UK fiscal risks may prevent a sustainable break higher. Conversely, stronger-than-expected U.S. data or hawkish Fed pushback could see the pair retest 1.33 or lower. With MUFG projecting 1.40 for GBP/USD by Q2 2026 on expected dollar weakness, the longer-term trajectory remains bullish, but near-term trading is likely to remain volatile within a broad 1.3140–1.3595 band.

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USD/JPY Price Under Pressure as Fed Rate Cut Bets Rise

The USD/JPY pair is pinned between technical barriers and shifting macroeconomic winds as traders brace for the dual impact of U.S. labor market weakness and Japan’s evolving monetary stance. The dollar index has been dragged lower after the latest nonfarm payrolls report showed only 22,000 new jobs in August, well below the forecast of 75,000. Unemployment ticked higher to 4.3%, while Treasury yields slipped, with the 10-year benchmark down 2% on the day to 4.09%, the lowest since July. This soft data has bolstered market conviction that the Federal Reserve will deliver a 25 bp rate cut in September and another in October, with CME FedWatch now showing combined odds above 75%.

Technical Setup for USD/JPY Between 147.80 and 149.00

On the charts, USD/JPY has struggled to break above its 200-day moving average near 148.79, with repeated rejections keeping resistance locked around the 148.65–149.00 zone. An attempted breakout this week quickly reversed, pulling the pair back to 147.88, which now acts as immediate support. Failure to defend that level exposes the August low near 147.00, and if that breaks, deeper downside toward 146.00 and 145.00 could unfold. On the upside, only a decisive close above 149.20 would re-open the path toward 150.92, the August peak, and then the 151.00 level. Momentum indicators are neutral, with RSI hovering in the mid-50s, reflecting indecision as traders await stronger catalysts.

Bank of Japan Policy Path Clouded by Political Uncertainty

Japan’s domestic backdrop adds complexity. Wage growth accelerated to 4.1% year-on-year in July, up from 2.5% in June, while household spending rebounded 1.7% month-on-month after a 5.2% slump. Rising wages and improved consumption strengthen the case for the Bank of Japan to consider another rate hike later this year. However, political uncertainty continues to weigh, with resignations in the ruling LDP raising questions about whether leadership changes could pressure the BoJ to slow policy normalization. Despite turbulence, analysts still expect a rate hike by October or year-end, which, if confirmed, would strengthen the yen and pressure USD/JPY lower.

U.S. Data Flow and Fed Expectations Remain in Focus

The U.S. economy presents a split picture. The ISM services PMI rose to 52.0 in August, up from 50.1, showing resilience in non-manufacturing activity, while jobless claims and ADP private payrolls disappointed. This divergence has left the dollar’s outlook fragile, but the market is firmly leaning dovish. Fed officials, including New York’s John Williams and Chicago’s Austan Goolsbee, have acknowledged softening labor conditions while stressing inflation risks, leaving the Fed cautious but clearly biased toward easing. Should the Fed cut in back-to-back meetings, USD/JPY could see structural pressure back toward 145.00, aligning with Rabobank’s three-month projection.

Global Risk Sentiment and Correlation with Equities

Wall Street’s record-setting run has complicated flows into the yen. The S&P 500 closed above 6,500, with optimism around Fed easing fueling risk appetite and weakening the safe-haven yen. However, if U.S. equities retrace or if Treasury yields fall further, USD/JPY may decouple from risk-on sentiment and align more closely with interest rate differentials. Japan’s 30-year government bond yield, at its highest since 1998 earlier this week, underscores the divergence in bond markets that continues to drive volatility in the pair.

USD/JPY Outlook and Investment View

At 148.30, USD/JPY is locked in a tug-of-war between bullish dollar bets looking for a rebound to 150 and the bearish narrative of Fed cuts combined with a hawkish BoJ. The decisive catalyst remains the trajectory of U.S. labor data and the BoJ’s willingness to tighten policy despite political noise. With rate markets fully pricing in Fed easing, the downside risk may outweigh upside potential in the near term. Unless bulls can secure a close above 149.20, the bias leans bearish toward 147.00 and potentially 145.00. Medium term, however, volatility will remain elevated, making the pair a tactical trading opportunity rather than a straightforward directional play.

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EUR/USD Holds Near 1.1670 as Traders Brace for Fed Cut Bets

The EUR/USD pair is locked in a critical range, trading around 1.1670, supported by a rising trendline from late August and holding above the 50-EMA at 1.1659 and the 200-EMA at 1.1656. Despite three consecutive sessions of selling pressure earlier this week, the euro has managed to recover intraday, keeping the bias tilted toward upside while awaiting confirmation from U.S. labor data.

Weak U.S. Jobs Data Reshapes Dollar Outlook

The dollar’s recent strength has been undermined by increasingly fragile labor readings. ADP private payrolls showed just 54,000 jobs in August, sharply lower than July’s revised 106,000 and well below expectations of 65,000. Weekly jobless claims also rose to 237,000, the highest since June. These numbers have solidified market conviction of a September rate cut, with CME FedWatch now pricing a 99.4% chance of a 25-basis-point reduction. The broader U.S. Dollar Index (DXY) is stabilizing near 98.13, but downside risks remain should nonfarm payrolls confirm the slowdown.

Fed Policy Under Spotlight as Inflation Still Elevated

While rate cut bets dominate, inflation remains sticky. Core CPI above 3% and Core PCE at 2.9% keep the Fed cautious about how far and how fast it can ease. Fed officials such as John Williams have suggested gradual cuts are possible, while Austan Goolsbee flagged a “live” September meeting due to deteriorating labor conditions. Markets are currently projecting at least three cuts by year-end, but the balance between weakening jobs and still-firm inflation leaves EUR/USD highly sensitive to Fed communications.

ECB Policy Steady as Eurozone Growth Slows

The European Central Bank (ECB) provides a contrasting backdrop, with its ECB Watch Tool showing an 83.8% probability of rates staying at 2.00% at the September 10 meeting. Growth has slowed—Q2 GDP is expected at 0.1%, down from 0.6% in Q1—but policymakers have signaled stability rather than fresh easing. This divergence means that if the Fed cuts aggressively while the ECB holds steady, euro-denominated assets could gain relative appeal, lending medium-term support to EUR/USD.

Technical Structure Shows Bull Pennant and Inverse Head-and-Shoulders

Chart patterns are reinforcing bullish potential. On the daily timeframe, EUR/USD is forming a bull pennant, consolidating gains since August in a symmetrical triangle that often resolves higher. On shorter-term charts, an inverse head-and-shoulders has developed, pointing to a potential breakout if resistance levels are cleared. Immediate resistance sits at 1.1682, followed by 1.1708 and 1.1735. A decisive move above these thresholds could open the door for a run toward 1.2000, where structural supply sits. Support is anchored at 1.1614 and deeper at 1.1578, the 23.6% Fibonacci retracement.

Market Volatility Expected Around NFP Print

The nonfarm payrolls release is the pivotal driver in the immediate term. Consensus is for 75,000 jobs and unemployment at 4.3%, but revisions and wage growth will matter as well. Average Hourly Earnings are projected at 3.7% YoY, down from 3.9%, with monthly growth at 0.3%. A weaker-than-expected print would likely accelerate dollar losses and push EUR/USD through resistance, while a surprise beat could stall momentum and re-anchor the pair closer to 1.1610–1.1630 support.

Cross-Market Dynamics Add to Euro Strength

Global risk appetite has also been leaning toward the euro. German and French 30-year yields have retreated from recent highs, calming fears of European bond instability, while easing U.S. yields continue to undermine the dollar’s edge. Traders have noted the euro’s outperformance in the currency heatmap, where it has gained broadly across majors. Comparisons with other pairs—such as GBP/USD consolidating at 1.3454 and USD/JPY testing resistance near 149.23—show EUR/USD in a stronger technical setup, particularly as the euro represents 57.6% of the DXY basket.

Forecast for EUR/USD in the Coming Sessions

With EUR/USD consolidating near 1.1670 and holding its bullish chart formations, the balance of risk favors an upside breakout if U.S. labor data confirms weakness. A sustained move through 1.1720–1.1735 would invite momentum traders, with potential extensions toward 1.1850 and eventually 1.2000. However, if NFP surprises and the Fed remains more cautious than expected, EUR/USD could retreat back into the 1.1575–1.1610 zone. The pair’s trajectory into September hinges on this policy divergence: a Fed ready to cut against an ECB holding steady creates conditions for euro appreciation, but only if economic data aligns.

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• GBP/USD recovers above 1.3450 following Thursday’s choppy action.
• Investors await August employment data from the US.
• The pair could face a stiff resistance at 1.3480.

After failing to make a decisive move in either direction on Thursday, GBP/USD gathers bullish momentum and trades above 1.3450 in the European session on Friday. The pair faces a strong resistance at 1.3480 as investors await the August labor market data from the United States (US).

The US Dollar (USD) struggled to gather strength against its rivals as investors refrained from taking large positions following the mixed macroeconomic data releases. The Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI) rose to 52 in August from 50.1 in July, surpassing the market expectation of 51. On the other hand, the Automatic Data Processing’s (ADP) monthly report showed that private sector payrolls rose by 54,000 in August. This print missed analysts’ estimate of 65,000.

Nonfarm Payrolls (NFP) in the US are expected to increase by 75,000 in August and the Unemployment Rate is seen edging higher to 4.3% from 4.2% in July.

Although the CME FedWatch Tool suggests that markets are nearly fully pricing in a 25 basis-points (bps) rate cut in September, the employment report could still influence the probability of one more rate cut in October, currently at 55%, and drive the USD’s valuation.

In case the NFP comes in at or below 50K and feeds into growing fears over worsening conditions in the labor market, the USD could come under heavy selling pressure heading into the weekend and allow GBP/USD to push higher. Conversely, the USD could outperform its rivals on a positive surprise of 100K, or above, and cause the pair to reverse its direction.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rose slightly above 50, reflecting sellers hesitancy.

The 20-day, 50-day and the 100-period Simple Moving Averages (SMAs) converge near 1.3480 to form a strong resistance level. In case GBP/USD manages to clear this hurdle, it could face the next resistance at 1.3540 (Fibonacci 61.8% retracement of the latest downtrend) before 1.3600 (static level, round level).

Looking south, support levels could be spotted at 1.3440 (200-period SMA), 1.3390-1.3400 (Fibonacci 38.2% retracement, round level) and 1.3330 (static level).