EUR/USD climbs above 1.1100 on a slew of weak US labor market data

• EUR/USD gains further above 1.1100 as weak US Job Openings and private payrolls data weigh on the US Dollar.
• The major trigger for the US Dollar will be the August US NFP report on Friday.
• The ECB is almost certain to cut interest rates this month.

EUR/USD extends Wednesday’s recovery above the round-level resistance of 1.1100 in Thursday’s North American session. The major currency pair gains further as surprisingly downbeat United States (US) ADP Employment Change data has deepened fears about deteriorating labor demand. The agency reported that 99K fresh payrolls were hired in the private sector in August, while investors anticipated new addition of 145K job-seekers, higher than July’s reading of 111K, downwardly revised from 122K. 

Weak US private employment data has boosted market expectations for the Federal Reserve (Fed) to begin the long-awaited policy-easing cycle aggressively. A sharp increase in market speculation for the Fed’s large interest rate cut this month weighed heavily on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its downside to near 101.00.

The US Dollar was already facing pressure after the release of the weaker-than-projected JOLTS Job Openings data for July released on Wednesday. The JOLTS Job Openings data showed that job vacancies posted in July were lower at 7.67 million from a downwardly revised 7.91 million in June and below the estimates of 8.1 million. Weak job market data came in as red flags to the labor market.

For meaningful updates on current labor market conditions, investors await the US Nonfarm Payrolls (NFP) data for August, which will be published on Friday.

In today’s session, the US Dollar will continue to face volatility as the US ISM Services Purchasing Managers Index (PMI) data for August will be published at 14:00 GMT. Activity in the service sector is projected to have expanded at a slower pace, with PMI coming in at 51.1 from July's reading of 51.4.

Daily digest market movers: EUR/USD jumps higher as US Dollar slumps

• EUR/USD tests territory above 1.1100, with investors focusing on a slew of US economic data. The Euro (EUR) is performing strongly against its major peers even though annual Eurozone Retail Sales surprisingly declined by 0.1% in July. The Retail Sales data, a key measure of consumer spending, was expected to have grown at a similar pace. Meanwhile, monthly Retail Sales rose expectedly by 0.1%.
• Weak households' spending would prompt market speculation that the European Central Bank (ECB) will resume its policy-easing cycle this month, which started in June, after pausing in July.
• The ECB is widely anticipated to cut interest rates this month as officials have remained worried about poor growth prospects, with confidence that inflationary pressures continue to ease consistently.  ECB Governing Council member François Villeroy de Galhau said in an interview with Bloomberg last week, “There are good reasons for the central bank to consider cutting its key interest rates in September.” Villeroy added, "Unfortunately, our growth remains too weak.” He further added, “The balance of risks still needs to be monitored in Europe."
• Meanwhile, Eurozone growth concerns have deepened further as the final estimate HCOB PMI report showed that the overall economic activity expanded at a slower pace of 51.0 from the flash reading of 51.2. The Composite PMI expanded moderately due to slower growth in the service sector and a continuous contraction in the manufacturing sector.

Technical Analysis: EUR/USD discovers strong buying interest near 20-day EMA

EUR/USD jumps above 1.1100 on Thursday after a sharp recovery from a fresh two-week low near 1.1025. The near-term outlook of the major currency pair has improved as it manages to gain firm footing near the 20-day Exponential Moving Average (EMA) around 1.1055. 

The longer-term outlook is also bullish as the 50-day and 200-day EMAs at 1.0970 and 1.0865, respectively, are sloping higher. Also, the shared currency pair holds the Rising Channel breakout on a daily time frame. 

The 14-day Relative Strength Index (RSI) has declined below 60.00 after turning overbought near 75.00.

On the upside, the recent high of 1.1200 and the July 2023 high at 1.1275 will be the next stop for the Euro bulls. Meanwhile, the downside is expected to remain cushioned near the psychological support of 1.1000.