Key Points
- Friday’s US Non Farm Payrolls report came in far hotter than expected, 162,000 jobs added against a consensus near 55,000 to 56,000, with unemployment holding at 4.1%. That reinforced expectations for a Fed rate hike later this month, lifted yields and the dollar, and knocked gold back down to $4,420. This week brings two of the most important data points on the entire September calendar, Thursday’s ECB rate decision and Friday’s US CPI print.
- EUR/USD sits at 1.16125 on the H4 chart, consolidating just below the 1.1640 weak high after Friday’s dollar strength stalled its recovery from the 1.1580 low. Thursday’s ECB decision, where a 25 basis point hike to 2.50% is fully priced, is the pivotal event for the pair this week.
- The S&P 500 sits at 7,709 on the H4 chart, consolidating just below its recent recovery high of 7,760 after a choppy few weeks. Friday’s US CPI print is the next major catalyst for risk appetite heading into the Fed’s 16 September decision.
Last Week in Review
Friday’s jobs report delivered the surprise markets were not positioned for. The US economy added 162,000 jobs in August against a consensus of roughly 55,000 to 56,000, a significant beat that followed July’s shock loss of 23,000. The unemployment rate held steady at 4.1%, and the combination was read as clear vindication for the hawkish camp heading into the Fed’s 16 September meeting.
The market reaction was swift. Treasury yields ticked higher, the dollar firmed broadly, and gold gave back over 1% of its recent recovery, falling to $4,420 as rate hike bets were reinforced. EUR/USD pulled back from its earlier highs near 1.1640, unable to hold the gains built earlier in the week. Equities were more measured than the currency and metals reaction, with the S&P 500 and other major indices consolidating rather than reversing sharply, a sign markets are still weighing whether strong jobs data is good news for growth or bad news for rates.
EUR/USD: ECB Decision Looms Over a Stalled Recovery
Chart: EUR/USD, H4 timeframe (TradingView, SMC)
The H4 chart shows a pair that has been through a full cycle over the past six weeks. EUR/USD rallied from around 1.1450 in late July to an equal highs resistance near 1.1720 by 19 to 21 August, before a bearish change of character confirmed a reversal that carried price all the way down to a strong low at 1.1580 by 27 to 30 August, the same window as the Fed’s Jackson Hole driven repricing. A fresh bullish change of character then sparked a recovery back to a weak high of 1.1640 by 3 September, but Friday’s payrolls beat stalled that move, and the pair is now consolidating at 1.16125.
Overhead, supply is stacked in three bands: 1.1640 to 1.1660 immediately above current price, then 1.1680 to 1.1700, and the original 1.1700 to 1.1720 zone from the August highs. Below, the 1.1580 strong low is the first line of defence, with deeper demand sitting between 1.1520 and 1.1580 should that level fail to hold.
Thursday’s ECB decision is the pivotal event. A 25 basis point hike to 2.50% is fully priced after Eurozone inflation accelerated to 3.3% year on year in August, its highest since September 2023, driven by a 14.3% jump in energy costs. With the hike itself already in the price, Lagarde’s forward guidance and the updated staff forecasts are likely to matter more than the decision. A hawkish tone alongside the hike could push EUR/USD through the 1.1640 to 1.1660 resistance, while a cautious or hike and pause signal risks a fade back toward 1.1580.
S&P 500: Holding the Recovery Ahead of US CPI
Chart: US500 (S&P 500), H4 timeframe (TradingView, SMC)
The S&P 500 has had an eventful six weeks on the H4 chart. A strong low near 7,280 on 30 to 31 July kicked off a sharp bullish sequence that carried price into a supply zone between 7,800 and 7,840 by 15 to 16 August. A bearish change of character then triggered a choppy pullback through the second half of August, extending into a fresh low near 7,610 by 29 to 30 August as the Jackson Hole repricing weighed on risk appetite alongside everything else.
From there, a bullish recovery carried price back up to 7,760 by 1 to 3 September as yields and the dollar eased off their highs, before Friday’s payrolls beat took some of the momentum out of the move. Price is now consolidating at 7,709, comfortably above the 7,610 strong low but still short of both the 7,760 recovery high and the deeper 7,800 to 7,840 supply zone from mid August.
Friday’s US CPI print is the next major test. Headline inflation is forecast to jump to 0.4% month on month from just 0.1%, holding at 3.4% year on year, while core is expected to hold at 0.2% month on month and tick down slightly to 2.4% year on year. A hot print stacked on top of Friday’s jobs beat would cement expectations for a hawkish Fed and could pressure equities back toward the 7,610 support, while an in line or soft core reading would ease some of that pressure and open the door to a retest of 7,760 and the 7,800 zone beyond it.
Key Events This Week
Thursday 10 September ECB Rate Decision
A 25 basis point hike to 2.50% is fully priced by markets, following Eurozone inflation accelerating to 3.3% year on year in August, its highest reading since September 2023, driven by a 14.3% surge in energy costs. With the hike itself already priced in, Lagarde’s forward guidance and the updated staff economic forecasts are likely to matter more than the headline decision for EUR/USD’s next move.
Friday 11 September US CPI
Headline inflation is forecast to rise 0.4% month on month, a sharp acceleration from 0.1% previously, while holding at 3.4% year on year. Core inflation is expected to remain at 0.2% month on month and tick down slightly to 2.4% year on year. This is the final major inflation reading before the Fed’s 16 September meeting and lands directly after Friday’s blowout payrolls number, making it one of the most closely watched releases of the month for both the dollar and broader risk appetite.
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