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• EUR/USD overextended its recent bull run, getting rejected from 1.0850.
• ECB rate cut forecasts have plummeted, prompting an FX rebalance.
• US NFP net jobs additions figures loom large on Friday.

EUR/USD tried to stretch for a fourth straight day of gains, but markets are drawing into the middle ahead of Friday’s key US Nonfarm Payrolls (NFP) print. The Euro saw a sharp rejection from the 1.0850 level on Thursday, ending Fiber’s three-day win streak. EUR/USD has had a stellar week, climbing 4.6% bottom-to-top from Monday’s opening bids.

FX markets have sharply rebalanced after rate cut expectations took a tumble this week. According to rate markets, the European Central Bank (ECB) is broadly expected to only cut interest rates one more time in 2025 following Thursday’s 25 bps rate trim. With the Euro facing a much tighter interest rate differential than previously expected, EUR/USD took a hard step higher this week. 

Markets remain hungry for more rate cuts to ease financing and borrowing costs, but still-sticky inflation in the EU (and now the US following a recent uptick in key inflation metrics) has hobbled central banks’ ability to enact rate adjustments.

US President Donald Trump shifted his stance on tariffs once again, revealing a temporary suspension on tariffs for all products encompassed by the USMCA agreement, which he personally negotiated in his first term. Even as the Trump administration continues to retract its previous tariff threats, markets are finding it challenging to regain enough risk appetite to trend upward.

On Friday, US Nonfarm Payrolls (NFP) will take on greater importance as investors closely monitor economic indicators. While the US economy remains generally strong, signs of weakness are emerging in the labor market. Additionally, a fresh wave of inflationary pressures, primarily due to concerns over tariffs, dampens growth forecasts.

EUR/USD price forecast
 

Thursday’s intraday rejection of the 1.0850 level puts the Fiber’s near-term bull run in the ground, at least for now. EUR/USD easily pierced the 200-day Exponential Moving Average (EMA) at 1.0650 this week, pushing the pair back into the bullish side of the key moving average for the first time since November.

Technical oscillators remain pinned in overbought territory, cautioning against further bullish positioning. However, little technical reason to try and catch a rising knife exist on the chart, outside of a potential rejection play off of an old support/resistance level from mid-October of last year.

EUR/USD daily chart
 

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