Last Updated on 09/09/2026
Fundamental Analysis
EUR/USD is trading around 1.1627 on Tuesday after US employment data significantly exceeded expectations. The stronger-than-expected jobs figures provided fresh support for the US dollar and boosted expectations of a more restrictive Federal Reserve stance. Markets are now turning their attention to the European Central Bank’s meeting on September 10. While a rate hike is already fully priced in, the ECB’s forward guidance will likely determine the euro’s next direction.
US Jobs Report Gives the Dollar Fresh Momentum
The US labour market recorded its strongest performance since March. Nonfarm payrolls increased by 162,000 in August, well above the market consensus of approximately 56,000. The unemployment rate remained at 4.1%, while annual wage growth stood at 3.1%. In addition, June and July payroll figures were revised upward by a combined 55,000, with July’s previously reported decline being revised into an increase.
Nonfarm payrolls track the number of paid jobs added to the US economy each month, excluding agricultural employment. The indicator is closely watched because it provides an important signal of labour-market strength and helps shape the Federal Reserve’s interest-rate decisions.
The resilience of the labour market reduces the need for the Fed to stimulate economic growth, leaving inflation as the primary policy concern. Following the report, financial markets increased the probability of a September rate hike to around 58%, compared with roughly 52% beforehand. Expectations for higher US interest rates made dollar-denominated assets more attractive, helping the greenback strengthen while keeping EUR/USD within a relatively tight range.
ECB Guidance Could Be More Important Than the Rate Decision
The ECB’s September decision is unlikely to come as a surprise. All 65 economists surveyed by Reuters expect the deposit rate to rise by 25 basis points to 2.50%. Financial markets are also assigning almost full probability to this outcome and currently anticipate the deposit rate could climb to approximately 3.00% by June 2027, implying two additional hikes after this week’s meeting.
Because the rate increase is already largely reflected in market pricing, the decision itself may have limited impact on the euro. Instead, traders are likely to focus on Christine Lagarde’s comments and the ECB’s assessment of future monetary policy.
Eurozone inflation accelerated to 3.3% in August, largely because of higher energy prices. Lagarde has previously highlighted the energy shock as an upside risk to inflation, making the ECB’s future policy stance particularly important.
If Lagarde signals that additional tightening remains possible, the euro could receive renewed support against the dollar, potentially pushing EUR/USD towards 1.1655, the upper boundary of its current range. Conversely, if the ECB delivers the expected hike but avoids committing to further increases, the relative interest-rate outlook could remain more favourable for the US dollar, opening the way for a decline towards 1.1525.
German Factory Orders Provide Additional Support
German manufacturing orders increased 2.5% in July following an upwardly revised 3.7% rise in June. The result significantly exceeded expectations of a 0.3% increase and marked the third consecutive monthly gain.
However, the underlying details were less impressive. Excluding major contracts, new orders declined 1.4% from the previous month. Domestic demand surged 9.1%, while foreign orders dropped 2.1%. Orders from outside the euro area fell 10.1%, whereas demand from within the eurozone increased 12.1%.
Much of the headline improvement was driven by large contracts in sectors such as shipbuilding, rail and aircraft manufacturing. This suggests that Germany’s industrial recovery is continuing, although it remains heavily dependent on a limited number of major projects and stronger European demand. Nevertheless, the improvement provides some evidence that the eurozone economy may be capable of absorbing higher interest rates.
EUR/USD Technical Outlook
On the four-hour chart, EUR/USD is consolidating around the 1.1620 level. As long as the pair remains above this support, another advance towards 1.1655 remains possible. A sustained break higher could strengthen the near-term bullish outlook, while failure to hold the range could expose the pair to a deeper decline towards 1.1525.
The MACD indicator also favours the upside. Its signal line remains above zero and is pointing higher, suggesting that bullish momentum is still developing and that EUR/USD may have room for another upward move in the short term.
On the hourly chart, EUR/USD has completed a downward move towards 1.1620 and is now consolidating above this level. The current setup continues to favour a potential recovery towards 1.1655.
The Stochastic oscillator supports this scenario, with its signal line positioned above 20 and moving towards 80. This indicates that upward momentum has not yet reached an extreme level and could continue to strengthen.
Conclusion
EUR/USD begins the ECB week with a cautiously bullish technical setup, with 1.1655 representing the key near-term upside target. Fundamentally, however, the outlook remains balanced as both the ECB and Federal Reserve are moving towards tighter monetary policy.
With the ECB’s expected rate increase to 2.50% already priced into the market, the euro’s next major move will likely depend on the central bank’s forward guidance. While EUR/USD holds above 1.1620, the bullish scenario remains favoured, with 1.1525 serving as an important downside level if the upward move fails.
Attention will then shift to the US inflation data due next week, which could provide the next major catalyst for the dollar. Traders should therefore monitor the 1.1620–1.1655 range closely as the ECB decision approaches.
Leave a Reply