EUR/USD Forecast: Pair Extends Slide Ahead of US NFP as Bears Target 1.1200

What to Know

• EUR/USD extended its decline to 1.1325 on Thursday morning, its lowest level since May last year.
• The pair was down 3.18% from its highest point in August as attention shifted to the upcoming US nonfarm payrolls report.
• ADP data showed the US private sector added 90k jobs in September after adding 36k in the prior month, beating the sector median estimate of 73k.
• Core PCE rose from 0.1% in July to 0.2% in August, below the expected 0.3%, while the annual figure rose by 3.0%, below the expected 3.3%.
• Headline PCE rose from 0.1% in July to 0.3%, also below the expected 0.4%.
• The US economy expanded by 2.2% in the second quarter, above the previous estimate of 2.1%.
• US Treasury yields moved higher, with the 10 year yield at 5.28% and the five year yield at 5.07%.
• Technical traders are watching 1.1250, 1.1425, 1.1200 and 1.1400 as key near term levels.
• The daily chart shows EUR/USD below its 50 day moving average and trading along the lower Bollinger Band, while the RSI has fallen to 24.

EUR/USD Stays Under Pressure Before the Jobs Report

EUR/USD remained on the defensive as traders prepared for the next major test from the US labor market. The pair dropped to 1.1325 on Thursday morning, marking its weakest level since May last year and extending a broader slide that has been in place since August. The move left the euro under pressure against the US dollar, with market participants increasingly focused on whether incoming US data will support another Federal Reserve interest rate hike this year.

The decline has been notable because it has unfolded alongside mixed macroeconomic signals from the United States. Some data points have suggested resilience, particularly in employment and growth, while inflation readings have come in below expectations. That combination has kept the dollar supported, partly because the US economy continues to appear sturdy enough to withstand restrictive monetary policy for longer. For EUR/USD, the immediate question is whether the upcoming nonfarm payrolls report will confirm that picture or introduce enough doubt to trigger a rebound.

ADP Jobs Data Keeps Labor Market in Focus

The latest ADP employment data added to the sense that the US labor market remains relatively strong. The private sector added 90k jobs in September after adding 36k in the previous month. The increase was above the sector median expectation of 73k, giving dollar bulls another argument that the economy still has momentum. While ADP figures do not always map perfectly onto the official nonfarm payrolls release, they often shape positioning ahead of the larger jobs report.

A strong official employment report would likely raise expectations that the Federal Reserve could hike interest rates again this year. Higher rates tend to support the dollar by improving the relative yield available on US assets. For the euro, that backdrop can be difficult, especially when traders are already dealing with a clear technical downtrend. If payrolls data shows continued job creation, EUR/USD bears may attempt to extend the decline toward the next support zones.

Still, labor market data can cut both ways. If the nonfarm payrolls numbers come in softer than expected, market participants may reassess the case for additional tightening. In that scenario, the dollar could lose some of its recent momentum and EUR/USD could attempt a short term recovery from oversold conditions. For now, however, the path of least resistance has remained lower as traders wait for confirmation.

Inflation Data Adds Complexity to the Fed Outlook

The latest Personal Consumption Expenditures inflation figures complicated the outlook. Core PCE rose from 0.1% in July to 0.2% in August, which was below the expected 0.3%. On an annual basis, the core figure rose by 3.0%, below the expected 3.3%. Headline PCE also increased, moving from 0.1% in July to 0.3%, but that was lower than the expected 0.4%.

For the Federal Reserve, these figures matter because PCE inflation is a key gauge of underlying price pressure. Softer than expected inflation can reduce the urgency for additional rate increases. However, the market reaction has not been straightforward because other parts of the data set point to resilience. The economy expanded by 2.2% in the second quarter, stronger than the previous estimate of 2.1%. That growth figure suggests the economy has not slowed as much as some traders may have expected.

The result is a policy outlook that remains sensitive to each major data release. Inflation figures below expectations may argue for caution, while stronger employment and growth figures may give policymakers room to remain hawkish. Several Fed officials, including Susan Collins, Jeff Schmid and Christopher Waller, are expected to speak, and traders will listen carefully for signals on how officials interpret the latest data.

Bond Yields Rise as Dollar Demand Holds

US Treasury yields moved higher after the data, reinforcing support for the dollar. The 10 year yield rose to 5.28%, while the five year yield climbed to 5.07%. Rising yields can make dollar denominated assets more attractive, particularly when investors believe the Federal Reserve may keep policy tight or consider another rate move. That yield advantage has been one of the main pressure points for EUR/USD during the latest decline.

For currency traders, higher yields often matter as much as the data itself. The exchange rate is not only responding to whether inflation is high or low, or whether jobs are strong or weak. It is also reacting to how bond markets price the likely path of interest rates. As long as US yields stay elevated, the dollar may remain supported and EUR/USD may struggle to build a durable recovery.

Technical Picture Favors Bears, but Oversold Signals Matter

The daily chart shows EUR/USD has been in a strong downtrend since August. The pair declined from a high of 1.1711 on August 21 to around 1.1337, a level that is important because it coincides with the June low. This overlap makes the current zone significant for technical traders because prior lows can act as either support or, if broken decisively, a gateway to a deeper selloff.

The pair has also moved below the 50 day moving average and is trading along the lower band of the Bollinger Bands. That combination typically reflects persistent bearish momentum. When prices hug the lower band, it can signal that sellers remain in control, although it can also warn that the market is becoming stretched in the short term. The Relative Strength Index has fallen to 24, its lowest level since March, which reinforces the idea that the pair is oversold.

Oversold conditions do not automatically mean a reversal is imminent. In strong downtrends, markets can remain oversold while prices continue to fall. However, they do increase the risk of short covering or a relief rally if incoming data disappoints dollar bulls. This is why technical traders are watching both continuation and rebound scenarios closely.

Key Trading Levels for EUR/USD

Some chart watchers continue to frame a bearish setup around selling EUR/USD with a take profit at 1.1250 and a stop loss at 1.1425, using a short term timeline of one to two days. That view aligns with the broader downtrend and the possibility that sellers may press toward deeper support if the US jobs data strengthens the case for another Fed hike.

On the other side, a bullish setup would involve buying EUR/USD with a take profit at 1.1425 and a stop loss at 1.1250. That scenario depends more heavily on the market reacting to oversold technical conditions, softer US data, or less hawkish Fed messaging. A rebound toward 1.1400 remains possible if the pair finds support near current levels and the dollar loses momentum.

The wider bearish target watched by technical traders is 1.1200. If EUR/USD breaks cleanly below the June low region, bearish pressure could intensify toward that support level. Conversely, a move back toward 1.1400 would suggest buyers are attempting to stabilize the pair, though the broader trend would still require stronger evidence before shifting decisively.

PMI Data and Fed Speakers Add to Event Risk

Beyond the nonfarm payrolls report, EUR/USD will also react to upcoming US and European manufacturing and services PMI numbers. These releases will help traders compare the relative economic momentum of the United States and the euro area. If US PMIs outperform while European readings remain soft, the dollar could maintain an advantage. If European figures surprise positively or US activity weakens, the euro could find temporary support.

Fed commentary will also be closely watched. Remarks from Susan Collins, Jeff Schmid and Christopher Waller could influence expectations for the next policy step. If officials emphasize inflation risks, higher yields and dollar strength may persist. If they highlight cooling price pressures or the need for patience, EUR/USD could find room for a corrective bounce.

For FXCOINZ readers, the central issue is that EUR/USD is sitting at an important intersection of macro data and technical pressure. The trend is bearish, the pair is near a key historical low, and the RSI is deeply oversold. That makes the next wave of data especially important because it could either validate the bearish break or spark a short term recovery from stretched conditions.

Frequently Asked Questions (FAQs)

Why is EUR/USD falling?

EUR/USD is falling because the US dollar has remained supported by resilient US economic data, higher Treasury yields and expectations that the Federal Reserve could still hike interest rates again this year.

What level did EUR/USD reach on Thursday morning?

EUR/USD dropped to 1.1325 on Thursday morning, its lowest level since May last year.

How much has EUR/USD fallen from its August high?

The pair was down 3.18% from its highest point in August, reflecting a sustained decline from the August peak.

What did the ADP jobs report show?

The ADP report showed that the US private sector added 90k jobs in September after adding 36k in the previous month, beating the sector median estimate of 73k.

Why does the nonfarm payrolls report matter for EUR/USD?

The nonfarm payrolls report matters because a strong labor market could raise expectations for another Federal Reserve rate hike, which may support the US dollar and pressure EUR/USD.

What are the key bearish levels for EUR/USD?

Technical traders are watching 1.1250 as a near term bearish take profit level and 1.1200 as a broader support target if the downtrend continues.

What are the key bullish levels for EUR/USD?

Some chart watchers are monitoring 1.1400 as a possible rebound area and 1.1425 as a bullish take profit level if the pair recovers from oversold conditions.

What does the RSI reading suggest?

The RSI has fallen to 24, its lowest level since March, suggesting EUR/USD is oversold, although oversold conditions can persist during strong downtrends.

What other events could move EUR/USD?

Upcoming US and European manufacturing and services PMI data, along with remarks from Susan Collins, Jeff Schmid and Christopher Waller, could influence EUR/USD by shaping rate expectations and relative growth views.