EUR/USD Edges Lower as Eurozone Retail Sales Data Looms

The Euro continues to fluctuate within a narrow range as investors remain cautious ahead of crucial economic data. In the Eurozone, July’s Retail Sales figures are anticipated to reveal a slight decline. Meanwhile, the upcoming US ADP Employment report is expected to fuel market speculation regarding potential Federal Reserve policy adjustments.

As the European session begins on Thursday, the EUR/USD pair shows minor losses, trading at 1.1650. The currency pair continues to seek direction, hovering near the lower end of its recent trading range, as market participants await the Eurozone’s Retail Sales report. However, the primary focus remains on the US ADP Employment Change data, scheduled for release later in the day, and more importantly, on Friday’s US Nonfarm Payrolls report.

The previous day saw weak US JOLTS Job Openings data, which provided further evidence of a softening labor market and heightened expectations for imminent interest rate reductions by the Federal Reserve. This perspective was later reinforced by comments from Fed officials, including Governor Christopher Waller and Atlanta Fed President Raphael Bostic.

Market expectations for Fed easing at the upcoming September meeting surged to 97%, up from approximately 87% the previous day. This shift helped alleviate concerns about escalating fiscal debt in major global economies that had gripped markets earlier in the week. The US 30-year bond yield retreated below 4.90% from Wednesday’s peak of 5%, while in Europe, the long-term German Bund yield eased to 3.35% from multi-year highs of 3.43%.

Nevertheless, market sentiment remains cautious. Today’s spotlight is on the US ADP Employment report, which is projected to show relatively modest job creation ahead of Friday’s Nonfarm Payrolls. The latter could potentially confirm a 25 basis point rate cut following the September 17 Federal Open Market Committee (FOMC) meeting.

Euro Performance Overview

The table below illustrates the percentage change of the Euro (EUR) against major currencies today. The Euro demonstrated the strongest performance against the Australian Dollar.

This table shows percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is chosen from the top row. For instance, selecting the Euro from the left column and moving horizontally to the US Dollar, the percentage change displayed represents EUR (base)/USD (quote).

Key Market Movers: Investor Caution Prevails Ahead of US Employment Data

Debt concerns have subsided and risk aversion has diminished, which bodes well for the Euro. However, investors remain hesitant to take substantial short positions on the US dollar, wary of a potential positive surprise in the Nonfarm Payrolls report that could temper expectations of a September rate cut. Given this backdrop, the Euro is likely to continue fluctuating within its recent range.

Wednesday’s data revealed that US JOLTS Job Openings declined to 7.181 million in July, reaching their lowest levels in nearly a year and falling short of the 7.4 million forecast by market analysts. Additionally, June’s figure was revised down to 7.357 million openings from the previously estimated 7.437 million.

Later that day, Fed Governor Christopher Waller suggested in a television interview that the central bank might initiate rate cuts in September, noting that “we could see multiple cuts coming in” over the next six months.

Similarly, Atlanta Fed President Raphael Bostic stated that rate cuts in 2025 would be appropriate, although he emphasized that inflation remains the central bank’s primary concern.

In the Eurozone’s economic calendar, Thursday’s focus will be on July’s Retail Sales figures, which are projected to have contracted by 0.2% following a 0.3% increase in the previous month.

For the US, the highlight will be the Automatic Data Processing (ADP) Employment Change report due at 12:15 GMT. August’s data is expected to show a 65K increase in private payrolls, down from 104K in July. These relatively modest figures may intensify concerns about a weakening labor market ahead of Friday’s crucial Nonfarm Payrolls report. The potential impact on the US Dollar appears to be tilted towards the downside.

Technical Analysis: EUR/USD Remains Vulnerable, with Support at 1.1585 in Focus

While EUR/USD has managed to resist the bearish pressure observed earlier in the week, it is not yet out of danger. Investor sentiment remains cautious, with long-term yields still near historic highs and France’s uncertain political landscape weighing on the currency. Technical indicators show a lack of clear direction, but the bottom of the past four weeks’ trading range, around 1.1585, remains within striking distance.

Immediate support lies at Wednesday’s low, near 1.1610, followed by the critical support zone between 1.1575 and 1.1590, which has held firm against bearish pressure on August 11, 22, and 27. Further below, the 50% Fibonacci retracement level of the early August bullish run, at 1.1565, may offer some support ahead of the August 5 low, around 1.1530.

On the upside, Wednesday’s high of 1.1682 presents the first obstacle for bulls, followed by the descending trendline resistance, currently around 1.1725, and the 1.1735 area, which capped bullish momentum on August 13, 22, and September 1.