EUR/USD has stabilized near the 1.14 area after a sharp June decline, with the rebound driven primarily by renewed pressure on the U.S. dollar. The latest U.S. Nonfarm Payrolls report showed job growth of just 57,000 in June, well below market expectations, while previous months were revised lower.
The weaker labor market data prompted investors to scale back expectations for additional Federal Reserve tightening, weighing on Treasury yields and the dollar. At the same time, Fed Chair Kevin Warsh reiterated that inflation risks have eased, reinforcing expectations that policymakers can remain patient in coming meetings.
ECB keeps tightening bias alive
The euro has also found support from the European Central Bank's relatively firm policy stance. ECB President Christine Lagarde recently emphasized that inflation and growth risks have become more balanced, while markets continue to assign meaningful probability to another ECB rate increase later this year if inflation remains persistent. Although eurozone growth remains modest, the current policy outlook has narrowed the expected divergence between the ECB and the Fed, limiting downside pressure on the single currency.
Technical picture points to critical support test
The daily chart shows EUR/USD rebounding after successfully defending the highlighted support zone around 1.1380-1.1450. Price briefly slipped below the lower boundary before buyers stepped back in, suggesting demand remains active at this level. However, the pair continues to trade below its short and medium-term moving averages, indicating that the broader corrective trend remains intact. A sustained recovery above the resistance area near 1.1450-1.1480 would improve the technical outlook and expose the 1.1550 region, while another rejection could bring the recent lows back into focus.
Markets shift attention to inflation and Fed guidance
Looking ahead, traders will focus on upcoming U.S. inflation data, Federal Reserve communication, and additional macroeconomic releases to determine whether the recent dollar weakness marks the beginning of a broader trend or only a temporary correction. If incoming U.S. data continue to soften while the ECB maintains a relatively restrictive stance, EUR/USD could extend its recovery. Conversely, stronger U.S. economic releases would likely revive demand for the dollar and keep the pair under pressure, as was written in the article EUR/USD tests resistance as weak U.S. jobs data pressures dollar.
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