EUR/USD eased to about 1.1550 in Monday’s European session as the US Dollar steadied after an early rebound, while traders pared back hawkish Federal Reserve expectations following weaker US Nonfarm Payrolls data. The July US CPI release due on Wednesday is set to be the next major catalyst for the Dollar. In the Eurozone, Sentix Investor Confidence improved into positive territory, rising to 0.9 in August from -3.1 in July.
The US jobs report showed payrolls falling by -23,000, alongside a 37,000 downward revision to June. Separately, the pair remained above the 20-day EMA at 1.1484 and near a descending trend line around 1.1520, with the RSI (14) close to 61. Support is located near 1.1520 and then 1.1484; resistance is seen at 1.1581, with scope towards 1.1644 if that level is cleared.
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Technical Breakout Prompts Bullish Strategies For EUR/USD
We suggest derivative traders prepare for bullish strategies, such as buying EUR/USD call options, as the pair hovers near 1.1550 and breaks above its downward trendline. This technical breakout is supported by Eurozone Sentix Investor Confidence jumping to 0.9 in August, up from -3.1 in July. Historically, breakouts above the 1.1500 psychological barrier, like the major shift seen in mid-2020, often trigger sustained upward momentum.
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Favorable Macroeconomic Backdrop And Risk Management Levels
We believe the cooling US labor market, highlighted by the surprising loss of 23,000 jobs in the latest Nonfarm Payrolls report, will limit the US Dollar’s recovery. This soft labor data, coupled with a downward revision of 37,000 jobs for the previous month, has led market participants to significantly price out aggressive Federal Reserve rate hikes. With inflation showing signs of stabilizing—historically tracking closer to the Fed’s target over the past year—the macroeconomic backdrop heavily favors Euro strength.
For those utilizing futures or structured option plays, we recommend setting immediate risk boundaries around the 1.1520 trendline support and the 20-day exponential moving average at 1.1484. A sustained hold above the recent high of 1.1581 could quickly expose the next major target at 1.1644. Derivative traders should also watch the upcoming US Consumer Price Index data on Wednesday, as high-impact inflation reports historically cause average daily EUR/USD volatility to spike by over 80 pips.
