The EUR/USD pair extended declines to approach a two-week low on Monday, as the U.S. dollar regained ground following remarks from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.
Warsh’s hawkish tone reinforced expectations for tighter U.S. monetary policy, with markets now pricing a 57% probability of a September rate hike, up from roughly 35% before his speech. The shift in sentiment coincided with a rise in the 10-year Treasury yield to 4.33%, increasing the relative attractiveness of dollar-denominated assets.
The dollar’s advance has pushed EUR/USD toward the lower end of its recent range, with the pair trading near 1.1587. The focus now shifts to Friday’s U.S. labor market report, which will provide the clearest indication of whether the economy can sustain further tightening. Consensus forecasts project an increase of 50,000 nonfarm payrolls in August, following an unexpected contraction of 23,000 in July. The unemployment rate is expected to hold at 4.1%.
A stronger-than-expected reading would bolster Warsh’s hawkish stance and potentially push EUR/USD below the 1.16 threshold. Conversely, weaker data could reduce rate-hike expectations, lower Treasury yields, and ease pressure on the single currency. Intermediate labor indicators, including Tuesday’s JOLTS report and Thursday’s jobless claims, will also be monitored for early signals.
In Europe, eurozone inflation figures due this week will be closely watched. Analysts expect headline inflation to accelerate to 3.3%, a development that could reinforce expectations for an ECB rate hike in September and provide some counterbalance to the dollar’s strength.
Technical indicators suggest continued bearish momentum for EUR/USD. On the four-hour chart, the pair has carved out a downward wave to 1.1567, with a consolidation phase forming above this level. A minor rebound toward 1.1597 is not ruled out, but further declines to 1.1555 are expected, with the potential for a deeper move to 1.1533 and 1.1511. The MACD indicator’s signal line remains below zero and trending downward, reinforcing the bearish bias.
The hourly chart similarly reflects a downward trajectory, with the market completing a wave to 1.1576. A brief consolidation above this level could precede a decline to 1.1533, with the Stochastic oscillator signaling continued downward pressure as its signal line falls below 80 toward the 20 level.
The analysis, provided by RoboForex’s analytical department, underscores the sensitivity of EUR/USD to shifting policy expectations and incoming economic data.
