EUR/USD rose for a second day on Friday but remained unable to clear 1.1475, even as the US Dollar retreated after weaker US labour data reduced expectations of near-term Federal Reserve tightening. June nonfarm payrolls showed 57K net new jobs, compared with a 110K consensus forecast; May was revised lower to 129K from 172K. The pair traded around 1.1455, holding a firm short-term bias while price action stayed contained below the 1.1475–1.1500 zone.
Eurozone data provided additional support, with the final June HCOB Services PMI revised up to 49.4 from 48.9, lifting the Composite PMI to 50 from 49.5. In technical terms, RSI (14) was in the low 60s and MACD was modestly positive, though resistance was flagged near 1.1500, where former June lows converge with the 38.2% Fibonacci retracement. A break higher would bring 1.1620 into view, while support sits near 1.1360 and then 1.1333, with 1.1210 below.
US Jobs Report and Shifting Policy Expectations
We see the recent US jobs report as a pivotal moment, fundamentally cooling expectations for a Federal Reserve rate hike in the near future. The surprisingly low 57,000 jobs added has weakened the dollar and given the Euro a clear, albeit limited, runway. This reinforces our view that the path of least resistance for EUR/USD is upward for now.
Looking at market pricing, the CME FedWatch Tool now shows the probability of a rate hike at the next FOMC meeting has plummeted to under 40%, down from over 70% just last week. This policy shift contrasts with the European Central Bank, where recent commentary suggests a continued focus on inflation. This growing policy divergence should provide a tailwind for the Euro against the dollar.
Tactical Trading Approaches and Key Levels
Given the significant technical resistance expected around the 1.1500 level, we are not chasing an aggressive breakout with simple long positions. We favor derivative strategies that capitalize on a modest, capped rally, such as buying bull call spreads. For example, purchasing a 1.1450 call while selling a 1.1500 call offers a defined-risk way to profit if the pair grinds higher but stalls.
The weak jobs data has removed some near-term uncertainty, which should lead to lower implied volatility for EUR/USD options over the coming weeks. This makes selling premium an attractive strategy, so we are also considering selling out-of-the-money puts with strikes below the 1.1360 support level. This strategy benefits from both time decay and the pair remaining stable or rising.
Historically, after similarly weak NFP reports where the miss was over 40% of the consensus estimate, the US Dollar has typically underperformed for the following two to four weeks. We will be watching the 1.1475-1.1500 zone as a key decision point. A failure to break through this area would prompt us to protect any bullish positions.
