EURUSD Is Pushing Below 1.1000

The U.S. Dollar Index (DXY) has risen by 0.15% this week, reaching 101.85 points, while the EUR/USD has dipped by 0.10% to 1.10340. The Dollar experienced a significant strengthening last week, recovering nearly all the losses incurred following Federal Reserve (Fed) Chairman Jerome Powell's speech in Jackson Hole.

The EUR/USD closed last week at 1.10440, which is 1.4% below a 13-month high of 1.12000 set the week before. The pair is approaching a critical threshold at 1.10000, which could determine the market’s future direction.

Three major events are on the horizon in September. First, the U.S. labour market report for August will be released this Friday. Following that, inflation data for August will be published, and finally, the Fed is expected to hold a meeting where an interest rate cut is anticipated. Even large investors are feeling uncertain; they participated in the recent decline and subsequent recovery of the Dollar, investing $39.9 million in the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) during the third week of August. However, last week saw profit-taking, with the USDU reporting net outflows of $17.2 million. Despite this, many still believe the Greenback is oversold, hoping for further strengthening.

Macroeconomic data is supportive of the Dollar. The U.S. Q2 GDP was revised upward to 3.0% quarter-on-quarter. Upcoming macroeconomic releases are also expected to be positive. Manufacturing PMI is forecasted to rise, while Services PMI is expected to remain neutral. Employment in the U.S. is projected to increase in August, with a consensus of 164,000 new jobs being created. Goldman Sachs (GS) estimates that Nonfarm Payrolls could rise even further to 185,000, and unemployment could decline to 4.2% from 4.3% in July.

Historically, September has been a positive month for the Dollar on average. The U.S. Dollar strengthened by 2.4% in September 2023 and by 2.7% in 2022. Each time, the Dollar's mid-September rise was double the increase seen by the end of the month, indicating high volatility during September. Considering these historical trends, the EUR/USD could drop below 1.10000 in September, potentially reaching the 1.07000-1.08000 range.