EUR/USD is trading flat as investors await key US data releases

• The Euro remains trapped within a tight range, with investors cautious ahead of key US macroeconomic releases.
• Eurozone Retail Sales have shown a larger-than-expected decline in consumption in July.
• The US ADP Employment data due later in the day is likely to feed market hopes of Fed easing.

The EUR/USD pair holds minor losses, trading around 1.1650 ahead of the US session opening on Thursday. The pair keeps looking for direction, weighed by weaker-than-expected retail sales figures, while investors await the release of the US ADP Employment Change, due later in the day and, above all, on Friday’s US Nonfarm Payrolls report.

Data released by Eurostat earlier on the day revealed that Eurozone retail consumption declined 0.5% in July, well beyond the 0.2% contraction anticipated by the market consensus, while June’s data was revised to a 0.6% increase from the previously reported 0.3% gain. Year-on-year, retail sales increased 2.2%, below the 2.4% expected, and down from last month’s 3.5% growth.

On Wednesday, the weak US JOLTS Job Openings data added to evidence of a weak labor market and boosted expectations of immediate Federal Reserve (Fed) interest rate cuts. This view was confirmed by Fed speakers like Governor Christopher Waller and Atlanta Fed President Raphael Bostic later on.

Investors’ bets on Fed easing in the upcoming September meeting surged to 97%, from about 87% in the previous day, which calmed fears about the ballooning fiscal debt in the world’s major economies that had gripped markets earlier in the week. The US 30-year bond yield retreated below 4.90% from Wednesday’s highs at 5% while, in Europe, the long-term German Bund yield eased to 3.35% from multi-year highs at 3.43%.

The market mood, however, remains cautious. The focus today is on the US ADP Employment report, which is expected to show relatively low employment creation ahead of Friday’s Nonfarm Payrolls. The last might confirm a 25 basis points rate cut after the September 17 Federal Market Open Committee (FOMC) meeting.

Daily digest market movers: Investors are hesitant ahead of US employment data

• Debt fears have eased and risk aversion has faded, which is good news for the Euro. Investors, however, are reluctant to place large US shorts, wary of a positive surprise in the Nonfarm Payrolls report that might dampen hopes of a September rate cut. Against that background, the Euro is likely to remain wavering within previous ranges.
• Data released on Wednesday showed that the US JOLTS Job Openings fell to 7.181 million in July, their lowest levels in nearly a year, and well below the 7.4 million forecasted by market analysts. Beyond that, June’s reading was revised to 7.357 million openings from the previously estimated 7.437 million.
• Later in the day, Fed Governor Christopher Waller suggested in a CNBC interview that the bank might start cutting rates in September and that “we could see multiple cuts coming in” over the next six months.
• In the same line, Atlanta Fed President Raphael Bostic affirmed that it would be appropriate to cut rates in 2025, although, in his opinion, inflation is still the central bank’s main concern.
• Also on Wednesday, US President Donald Trump’s nominee to fill Fed Governor Adriana Kugler’s vacancy assured that he will defend the Federal Reserve’s independence in a hearing at the Senate Banking Committee.
• In the economic calendar on Thursday, the focus is on the Automatic Data Processing (ADP) Employment Change due at 12:15 GMT. August’s data is forecasted to show a 65K increase in private payrolls, down from 104 in July. These are relatively low figures and might increase concerns of a weakening labor market ahead of Friday’s key Nonfarm Payrolls report. The risk for the US Dollar is skewed to the downside.
• Somewhat later, the ISM Services PMI is expected to show some improvement in the sector’s activity, with the August reading increasing to 51.0 from 50.1 in July.

Technical Analysis: EUR/USD remains vulnerable, with 1.1585 support area on the bears’ focus

EUR/USD has shrugged off the bearish pressure seen earlier in the week, but it is not out of the woods yet. Investors’ mood remains cautious with long-term yields still near historic highs and France’s uncertain political scenario weighing. Technical indicators show a lack of clear bias, but the bottom of the last four weeks’ trading range, in the 1.1585 area, remains at a relatively short distance.

Immediate support is at Wednesday’s low, near 1.1610, ahead of the key support area between 1.1575 and 1.1590, which capped bears on August 11, 22, and 27. Further down, the 50% Fibonacci retracement level of the early August bullish run, at 1.1565, might provide some support ahead of the August 5 low, near 1.1530.

To the upside, Wednesday’s high of 1.1682 is the first hurdle for bulls ahead of the descending trendline resistance, now around 1.1725 and the 1.1735 area, which held bulls on August 13 and 22, and September 1.