EUR/USD Forecast: JOLTS and the Fed's Next Move

Next week, on September 1st  JOLTS report.

The last one we got for June showed job openings dropped to 7.36 million, which was worse than the 7.4 million people were expecting. So the job market's been cooling off a bit lately.

When the job market looks weaker, it is more likely Fed will cut interest rates, and when the Fed cuts rates, the dollar gets weaker too, which means euros get more expensive in dollar terms. So a weak JOLTS number next week would likely push EUR/USD higher. A surprisingly strong number would do the opposite and give the dollar a bit of a boost.

Right now EUR/USD is sitting around 1.167, and it's had a really good run - up almost 3% over the past month. That's mostly because the dollar's been weak, not because the euro's been especially strong. Part of that is the US Treasury doing bond buybacks that pushed long term interest rates down.

Before we even get to JOLTS, there's a big Fed speech this Friday, August 28, at the Jackson Hole conference. It’s the one event each year where central bankers from around the world gather and the Fed chair's speech tends to set the tone for markets. Investors are going to be listening closely for hints about whether he leans toward cutting rates in September or not.

Whatever tone he sets on Friday will likely carry into the following week, so by the time JOLTS drops on Tuesday, the market will have already reacted once to whatever he says.

As for what investors expect, the overall mood on EUR/USD right now leans positive. Some analysts think the pair could climb toward 1.18 in the near term.

Bottom line: the setup leans in favor of the euro right now. If the jobs numbers keep coming in soft, that supports more dollar weakness and probably keeps pushing EUR/USD higher, maybe toward that 1.17-1.18 zone. If the numbers come in strong, or if Warsh sounds tougher on inflation than expected, you'd likely see the dollar strengthen and the pair pull back some. Keep an eye on Friday's speech first, since that'll set the tone before the jobs data even hits.