EUR/USD Analysis: Downtrend Breakout Still Lacks Confirmation

EUR/USD impact: mixed, with a modest bullish bias only if the breakout is validated.

The technical setup has improved, but it remains vulnerable to reversal. EUR/USD has broken above the descending trendline and is attempting to hold above the 1.1610 market-profile boundary. However, the RSI has moved into positive territory while the moving averages remain bearish, indicating that momentum has improved faster than the underlying trend. This makes the move vulnerable to a “false breakout” rather than confirming a durable trend change.

The August US employment report is the immediate volatility catalyst. A result near or below the 53,000 consensus would reinforce expectations of a weakening US labor market, potentially lowering Treasury yields and increasing pressure on the dollar. That would provide the fundamental confirmation EUR/USD’s technical breakout currently lacks. Conversely, a materially stronger payrolls result—or firm wage and participation details—could revive expectations that the Federal Reserve will remain focused on inflation rather than labor-market support, strengthening the dollar and exposing the breakout to failure. The employment reaction may therefore be driven as much by rate-market repricing as by the headline payroll number.

The euro also has a relative-rate tailwind: the source reports that all surveyed economists expect a 25-basis-point ECB deposit-rate increase to 2.50% on September 10, with most expecting rates to remain there through year-end. If that expectation is sustained, it limits the downside from the European side of the EUR/USD rate differential. However, because the hike is widely anticipated, the supportive effect may already be priced in; any cautious ECB guidance could produce a “buy the rumor, sell the fact” reaction.

Key technical implications:

sustained trade above 1.1610 would improve the case for a move toward the 1.1660 resistance area. Failure to hold the breakout, followed by a break below the 1.1600 point of control and 1.1580 profile boundary, would favor a return toward the 1.1570 support zone and signal that sellers remain in control.

Overall, the near-term bias is event-driven and two-sided. A weak US report combined with stable ECB expectations would support EUR/USD and help validate the upside break. A strong US report, hawkish inflation interpretation, or rejection near resistance would favor renewed dollar strength. Traders should monitor payrolls, unemployment, wages, revisions, US yields, and post-report price acceptance above or below the stated profile levels.