Euro Gains on Labor Market Optimism, Eyes CPI Data for Next Catalyst

Key Takeaways:

*Eurozone unemployment fell to 6.2%, signaling improving job conditions and lifting the euro.

*Markets await eurozone CPI, expected to hold at 2%, reinforcing ECB policy stability.

*A steady inflation print could extend the euro’s near-term strength, especially against a cautious U.S. dollar.

Market Summary:

The euro strengthened against its G10 peers during the previous session, supported by better-than-expected labor market data from the eurozone. The region’s unemployment rate declined to 6.2% in July, down from a revised 6.3% the prior month, signaling ongoing resilience in the job market and underpinning confidence in the single currency.

Market attention now turns to the eurozone’s August Consumer Price Index (CPI) report, set for release later today. Consensus forecasts suggest headline inflation held steady at 2.0% year-on-year, a level aligned with the European Central Bank’s target. A confirmation of stabilized price growth would likely reinforce expectations that the ECB will maintain its current policy stance, supporting the euro amid broader uncertainty surrounding Federal Reserve policy.

A print in line with expectations may extend the euro’s gains, particularly if it reinforces the view that the eurozone economy is achieving a soft landing with contained inflation. However, any deviation—especially to the upside—could reintroduce volatility as traders reassess the ECB’s rate path.

The euro’s near-term trajectory will also be influenced by broader dollar dynamics, particularly in response to Friday’s U.S. PCE inflation data—the Fed’s preferred gauge.

Technical Analysis 

EURUSD, H4:

The EUR/USD pair continues to trade firmly within its uptrend trajectory, supported by the uptrend line that has guided its recent recovery. The pair has rebounded from earlier losses and is now testing the key resistance level at 1.1700. A decisive break and sustained move above this level would signal a strong bullish continuation for the pair.

Momentum indicators reinforce this outlook. The RSI is holding above the midline and approaching the overbought zone, while the MACD is edging higher above the zero line, both indicating strengthening bullish momentum in the near term.

Resistance Levels: 1.1805, 1.1920

Support Levels: 1.1590, 1.1455