EUR/USD tops 1.1750 as soft US jobs cement Fed cut bets

• EUR/USD trades above 1.1750 after the US economy added just 22K jobs in August, the Unemployment Rate rises.
• Markets fully price 25 bps September Fed cut, with slim 12% chance for larger 50 bps move.
• The Euro is supported by the US Dollar retreat, though the French PM ouster and the upcoming ECB meeting may cap further upside.

The EUR/USD pair post back-to-back bullish days, rising over 0.37% on Monday as traders grow confident that monetary policy in the United States (US) will resume its easing cycle after the Federal Reserve (Fed) Chair Jerome Powell acknowledged the weakness of the labor market. A soft jobs report pushed the pair past the 1.1700 figure, though it remains shy of the yearly peak of 1.1829.

Euro gains as Dollar weakens on NFP miss, French political turmoil adds uncertainty to outlook

Last Friday's Nonfarm Payrolls report reassured investors that the labor market in the largest economy in the world is undergoing an economic slowdown, yet to be reflected in Gross Domestic Product (GDP) data. In August, the economy added 22K jobs, below forecasts of 75K, while the Unemployment Rate ticked up from 4.2% to 4.3%.

The data cemented the case for the Federal Reserve's first rate cut in 2025. Market players had fully priced in a 0.25% cut, but odds for a 0.50% rate reduction stand at a slim 12% chance.

During the last couple of trading days, the US Dollar retreated almost 0.80% as traders await the Fed's September 16-17 meeting. This has been a tailwind for Euro bulls, who also need to address the political turmoil in France.

Recently, the Prime Minister François Bayrou was ousted after losing the confidence vote. French President Macron is expected to name a new PM in the upcoming days, with speculations mounting that it would be named after the September 10 strikes.

Ahead in the week, the docket on both sides of the Atlantic could ignite some volatility. In the US, inflation figures on the producer and consumer side could spark some action in the EUR/USD pair. On Thursday, the European Central Bank (ECB) is expected to keep rates in check.

Daily digest market movers: EUR/USD climbs above 1.1750 post NFP report

• The EUR/USD direction is directly linked to the US inflation report. The Producer Price Index (PPI) is released on Wednesday, and the Consumer Price Index (CPI) on Thursday. PPI is expected to hold steady at 3.3% YoY, while Core PPI is seen easing to 3.5% from 3.7%.
• CPI is projected to accelerate slightly, rising to 2.9% YoY from 2.7%, whereas Core CPI--which strips out food and energy--is anticipated to remain unchanged at 3.1%.
• In response, futures tied to the December 2025 Fed funds contract priced in nearly 69 basis points of easing by year-end.
• Investor sentiment in the Eurozone (EZ) slumped in September, revealed the Sentix investor confidence survey. The index fell from -3.7 to -9.2% in August. Sentix blamed the political instability in France, weakness in German industry, an "unfavorable" trade deal with the US and the conflict between Russia and Ukraine.
• Expectations that the Fed will reduce rates at the September meeting continued to trend higher. The Prime Market Terminal interest rate probability tool had priced in a 88% chance of the Fed easing policy by 25 basis points (bps) and a 12% chance for a 50-bps cut. The ECB is likely to keep rates unchanged, with a 89% probability, and only a 11% chance of a 25-bps cut.

Technical outlook: EUR/USD poised to challenge 1.1800 in the near term

The EUR/USD uptrend extended with buyers gathering steam. From a momentum standpoint, bulls are in charge as depicted by the Relative Strength Index (RSI).

With that said, the EUR/USD upside is seen to continue. The next resistance would be July 24, 1.1788, ahead of 1.1800. A breach of the latter will expose the year-to-date peak at 1.1829. Conversely, a daily close beneath 1.1700 can set the tone to challenge the 20-day Simple Moving Average (SMA) at 1.1675 ahead of the 50-day SMA at 1.1660.