01.09.202519:20 Forex Analysis & Reviews: EUR/USD. Analysis and Forecast

The EUR/USD pair continues to recover from the three-week low near 1.1570–1.1575 recorded last Wednesday and is gaining momentum at the start of the new month. The U.S. dollar has fallen below its August lows amid expectations of Fed rate cuts, a key factor driving the currency pair higher.

Traders are now pricing in a high probability of a 25-basis-point Fed rate cut in September, along with two additional cuts before the end of the year. Friday's Personal Consumption Expenditures (PCE) data did little to alter these expectations, as results pointed to continued inflationary pressures. According to the U.S. Bureau of Economic Analysis, the annual headline PCE price index remained at 2.6% in July. The core PCE price index, which excludes volatile food and energy categories, rose from June's 2.8% to 2.9% in the reporting month, in line with forecasts.

Nonetheless, pressure on the dollar persists, and concerns over Fed independence are adding to bearish sentiment. U.S. President Trump's recent decision to remove Fed Governor Lisa Cook over accusations of mortgage fraud sparked widespread concern. Cook refused to step down and filed a lawsuit, but the situation raises questions about the central bank's autonomy. Her departure would give Trump the opportunity to appoint new board members, potentially granting him majority control over the seven-member Board of Governors for the first time in many years. This is forcing dollar supporters into a defensive stance, making further EUR/USD upside more likely for now.

For additional insights into eurozone inflation, traders should watch Tuesday's preliminary August HICP release, which could influence the euro and the EUR/USD pair ahead of major U.S. macroeconomic reports at the start of the month.

The U.S. economic calendar this week begins Tuesday with the ISM Manufacturing PMI, followed by JOLTS job openings on Wednesday, and the ISM Services PMI on Thursday. The highlight, however, will be Friday's Nonfarm Payrolls (NFP) report, a key gauge for assessing the outlook for further Fed rate cuts and thus a major driver of the U.S. dollar and EUR/USD direction in the near term.

From a technical perspective, buying beyond the supply zone of 1.1745–1.1750 could serve as a new trigger for bulls. With oscillators on the daily chart beginning to build positive momentum, EUR/USD may aim to reclaim the 1.1800 round level, with interim resistance near 1.1770. The bullish impulse could extend toward July's yearly high near 1.1830. A decisive break above that level would open the door to further near-term gains.

On the other hand, a corrective decline below the 1.1700 round level would likely attract new buyers and find support around the 9-day EMA and 50-day SMA. Deeper selling would pave the way toward the 1.1600 round level, with interim support around 1.1630, before testing multi-week lows. A drop below those levels could expose the 100-day simple moving average (SMA). A decisive break under it would shift the short-term trend in favor of the bears.