EUR/USD digests data ahead of Fed decision

The EUR/USD pair held steady around 1.1727 USD on Friday, as the US dollar remained under pressure following the release of inflation data that largely met expectations. The figures reinforce the Federal Reserve’s scope to ease monetary policy amid growing signs of labour market softening.

The US August inflation report showed consumer prices rose 0.4% month-on-month, slightly above the forecast of 0.3%, while the annual rate came in at 2.9%, matching expectations. Meanwhile, initial jobless claims increased by 27,000 to 263,000 – the highest level since 2021 – underscoring emerging weakness in the employment sector.

Interest rate futures now indicate a 93% probability of a 25-basis-point cut at the Fed’s 17 September meeting. Market speculation around a more aggressive 50-basis-point reduction is also gradually building.

Across the Atlantic, the European Central Bank left its key rate unchanged at 2.0% for the second consecutive meeting. In political developments, the US and Japan issued a joint statement emphasising that exchange rates should be market-determined and that excessive volatility is undesirable.

Technical analysis: EUR/USD

Four-hour chart

On the H4 chart, EUR/USD has completed an upward move towards 1.1735 USD. A sustained break above this resistance level signals a continuation of the broader uptrend. However, a short-term pullback toward this level – now potentially acting as support – cannot be ruled out.The MACD indicator supports further gains: both the histogram and signal line remain above zero and are rising, confirming bullish momentum. The primary outlook favours an extension towards 1.1810 USD, with a further target at 1.1870 USD, though intermittent corrections may occur.

One-hour chart

On the H1 chart, the pair is testing resistance and showing signs of consolidation. A clear break above 1.1735 USD may trigger another leg higher. The Stochastic oscillator is testing the 80 level, suggesting strong upward momentum remains intact. The near-term upside target is 1.1810 USD.

Conclusion

EUR/USD remains well-supported as markets price in growing Fed dovishness, driven by softening labour data and stable inflation. With the ECB maintaining a steady stance and risk sentiment cautiously optimistic, the pair looks poised to extend gains, pending next week’s Fed decision. Technically, the path of least resistance appears upward, though a brief retracement may offer entry opportunities ahead of further advances.