Euro steadies above 1.1600 as traders await US NFP data

The EUR/USD pair trades on a flat note around 1.1625 during the early Asian session on Friday. Traders prefer to wait on the sidelines ahead of the US key employment report for August, which will be published later on Friday. 

Federal Reserve (Fed) Governor Christopher Waller said on Thursday that he is leaning toward keeping interest rates steady at the Fed’s September meeting provided there are no surprises from upcoming inflation data. His remarks seemed to contrast with hawkish statements last week from Chairman Kevin Warsh. 

Market-implied chance for a rate hike at the September policy meeting fell following Waller’s comments, with traders now pricing in just a 50.2% probability, down from 63.2% on Wednesday, according to the CME FedWatch tool. 

All eyes will be on the US jobs data later in the day for fresh cues on the US interest rate path. Economists expect the US economy to add 56,000 jobs in August, while Unemployment Rate is projected to hold steady at 4.1% during the same period. Any signs of improvement in the US labour market could provide some support to the US Dollar (USD) against the Euro (EUR) in the near term. 

Across the pond, the European Central Bank (ECB) is likely to raise interest rates at its September policy meeting for the second and final time in what would be its shortest hiking campaign in 15 years, according to a Reuters poll published on Thursday. Most economists believe energy price rises are not likely to trigger broad inflation pressures.

Euro support underpinned as ECB pricing turns more hawkish

Strategists at Scotiabank note that Eurozone rate expectations have shifted meaningfully in recent sessions, with markets now “extending hawkish pricing beyond the 25bpts of tightening priced for September, with nearly one full additional 25bpt hike priced by year-end.” They add that “yield spreads are offering renewed support” for the Euro, highlighting that their narrow “(2Y Germany-US yield spread) FV estimate is currently at 1.1623,” reinforcing the notion that the currency is trading close to its perceived fair value on rate differentials.

Waller flags data-dependent September call, keeps Fed bias cautiously hawkish

Fed’s Waller delivered a moderately hawkish-but-conditional message, with the FXS Speechtracker score at 6.1/10, slightly below the 6.3/10 historical average, underscoring a marginal softening in tone relative to the established baseline. The key remark that policy will likely be held steady in September if August inflation shows continued progress, but that a “hot” print could trigger a rate hike, clarifies the reaction function and keeps a live tightening risk on the table even as Waller notes “finally seeing some signs of disinflation,” solid GDP growth, and a satisfactory labor market. Emphasis on upside inflation risks, the possibility that only a small acceleration could justify tighter policy, and skepticism about PCE as the best real-time gauge all support a still-hawkish stance, albeit with growing confidence that underlying inflation is improving.

The FXS Fed Sentiment Index fell by 2.06 points to 125.38, signaling a modest pullback in perceived hawkishness versus recent communications captured by the FXS Speechtracker. With the index still well above the neutral 100 mark, the Fed remains firmly in hawkish territory, but Waller’s greater acknowledgment of disinflation and data-contingent approach suggests a gradual shift toward a more balanced, wait-and-see posture.

Technical Analysis: EUR/USD retains a positive outlook above the 100-day SMA

In the daily chart, EUR/USD holds a bullish near-term bias, with spot trading above the 100-day simple moving average (SMA). The Relative Strength Index (RSI) around 57 suggests positive but not extreme momentum, hinting that recent gains could be corrective within a broader capped structure, especially as price remains well under the upper Bollinger band.

On the topside, immediate resistance is seen at the 100-day SMA around 1.1565, with a stronger barrier aligning at the upper Bollinger band near 1.1712, where sellers are likely to reassert control if tested. On the downside, initial support emerges at the Bollinger midline near 1.1610, and a break below there would expose the lower band support around 1.1505, where a deeper pullback could pause.