On Friday, both EUR/USD and Gold (XAU/USD) surged as traders reacted to a weaker-than-expected US Nonfarm Payrolls (NFP) report, which led to a dovish repricing of Federal Reserve (Fed) rate hike expectations [1][2]. EUR/USD traded around 1.1562, near a seven-week high, supported by a softer US Dollar as investors scaled back Fed rate hike bets [1]. Gold soared over 2.30% on the day and more than 7% for the week, reaching $4,340 after hitting $4,371, its highest level since June 17 [2].
US jobs data revealed that the economy shed 23,000 jobs in July, missing forecasts for an 80,000 job gain. Additionally, payrolls for May and June were revised downward, removing a combined 103,000 jobs from the workforce. Despite the disappointing payrolls, the Unemployment Rate ticked lower from 4.2% to 4.1% [2]. Richmond Fed President Thomas Barkin commented that the jobs data was "very consistent with a sector in weak balance," describing the labor market as "low hire, low fire" [2].
The weak jobs report pushed US Treasury yields lower, with the 10-year yield down two basis points at 4.687%, and the US Dollar Index (DXY) falling 0.42% to 99.54, providing tailwinds for both EUR/USD and Gold [2]. Technical analysis for EUR/USD shows immediate resistance at the 100-day SMA (1.1568) and the 200-day SMA (1.1629), with support at the 50-day SMA (1.1471) and 1.1400. The RSI at 63 and positive MACD indicate bullish momentum [1]. Gold is also challenging its 100-day SMA, with bulls targeting the 200-day SMA [2].
Geopolitical developments contributed to market optimism, particularly regarding the potential reopening of the Strait of Hormuz. US President Donald Trump expressed belief that the war with Iran could be over soon, though Iran clarified that any agreement would only establish a temporary shipping route, not a full reopening [2]. WTI crude oil remained flat at $78 per barrel but was down nearly 9.9% for the week [2].
The swaps market reflected a sharp decrease in the probability of a Fed rate hike at the September meeting, with odds dropping to 30% from 58% a day earlier. There is now a 70% chance the Fed will keep rates unchanged [2]. Traders are closely watching the upcoming US Consumer Price Index (CPI) release for July, expected Wednesday, with consensus forecasts for inflation to decrease slightly from 3.5% to 3.4% YoY and Core CPI to dip from 2.6% to 2.5% YoY [2].
CONCLUSION
Disappointing US jobs data and dovish Fed rate hike expectations have fueled rallies in both EUR/USD and Gold, while US Treasury yields and the Dollar weakened. Market participants are now focused on upcoming US inflation data, which could further influence Fed policy and asset prices. The overall sentiment is bullish for EUR/USD and Gold, with high market impact expected.