Key takeaways
- EUR/USD remains resilient ahead of the US Nonfarm Payrolls report, supported by expectations that the European Central Bank will maintain a more aggressive tightening path than the Federal Reserve despite weak Eurozone growth.
- Interest-rate expectations are becoming increasingly supportive for the euro, with the Eurozone-US policy rate differential narrowing as markets price additional ECB rate hikes while the Federal Reserve faces a more balanced growth-versus-inflation trade-off.
- Technical indicators suggest EUR/USD may be forming a near-term base above key channel support at 1.1580, with improving momentum signalling a potential short-term recovery toward the 1.1645–1.1720 resistance zone.
Ahead of today’s critical US Nonfarm Payrolls release, the EUR/USD pair has been grinding sideways around the 1.1610-1.1620 zone, showing resilience amid a fundamentally strong US Dollar environment.
Diverging growth vs. converging hawkishness
The primary catalyst today will be the US labour market data. According to Reuters, the US economy is expected to have added 85,000 jobs in May, representing a slowdown from April’s 115,000, while the unemployment rate is forecast to remain unchanged at 4.3%.
A “slow-hire, slow-fire” equilibrium continues to anchor the US labour market, keeping conditions stable enough for the Federal Reserve to maintain its higher-for-longer stance. In fact, market pricing from the Fed funds futures market currently reflects a roughly 60% probability of a 25-basis-point hike by the Fed at its December 2026 meeting under new Chair Kevin Warsh.
Earlier this week, mixed signals, from stronger ADP and JOLTS data to an uptick in weekly jobless claims (225K), have kept traders cautious, clipping the USD slightly in recent sessions.
On the other side of the Atlantic, the Euro is being supported by an aggressively hawkish European Central Bank (ECB). Despite the Eurozone facing stagflation risks, with Q1 GDP growth a meagre 0.1% q/q, inflation remains sticky, hitting 3.2% y/y, largely driven by energy shocks.
Consequently, the latest Reuters polling indicates the ECB is highly likely to hike its deposit rate to 2.25% next week, providing a solid floor for the single currency and countering the dollar’s strength.
Further steepening of the Eurozone/US implied policy rate curve spread
Fig. 1: Eurozone/US implied policy rate curve spread as of 5 Jun 2026 (Source: MacroMicro). The information presented is historical information, and past performance is not indicative of future performance.
Also, the monthly implied future policy interest rate curves for the Eurozone and the US, based on short-term interest rate futures, have steepened.
The Eurozone/US implied policy rate curve spread in August 2026 has increased to -1.28% from June 2026’s print of -1.45% and shifted upwards from -1.45% three months ago (see Fig. 1).
These observations suggest that the ECB is likely to be more hawkish or less dovish than the Fed, reinforcing a “floor” on the EUR/USD.
Let’s now focus on the short-term trajectory (1 to 3 days) of the EUR/USD from a technical analysis perspective.
Forming a potential minor base above the medium-term ascending channel support
Fig. 2: EUR/USD minor trend as of 5 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
Trend bias: Bullish bias above 1.1580 medium-term pivotal support for a minor recovery (see Fig. 2).
Resistances: 1.1645/1660 (also the 20-day moving average), 1.1685 (also the 200-day moving average), 1.1720 (also the 61.8% Fibonacci retracement of prior decline from 6 May 2026 high to 21 May 2026 low).
Supports: 1.610/1595 (4 June 2026 minor low & medium-term ascending channel support from 13 Mar 2026 low), 1.1580 (MT pivot), 1.1555 (7 April 2026 congestion).
Key elements to support the near-term bullish bias on EUR/USD
- The recent sideways movement in EUR/USD since 21 May 2026 has formed a base/floor just above the lower boundary of the medium-term ascending channel in place since the 13 March 2026 low.
- The hourly RSI momentum indicator has staged a bullish breakout after finding support on its ascending trendline, suggesting a potential resurgence of short-term bullish momentum.
