The Dollar Puts on a Show. Forecast as of 04.08.2025
The latest US employment data has flipped the global narrative. Why should investors care about the eurozone when the US economy itself is sliding into the abyss? Let’s discuss it and make a trading plan for EUR/USD.
The article covers the following subjects:
Major Takeaways
- The US labor market cooled significantly from May through July.
- Donald Trump fired the head of the Bureau of Labor Statistics.
- Odds of a Fed rate cut in September jumped to 80%.
- As long as EUR/USD stays above 1.1545, bullish bias remains in place.
Weekly Fundamental Forecast for Dollar
The circus has come to the United States. Some would say it arrived earlier, with Donald Trump’s election in November or his inauguration in January. However, investors followed the Fed’s lead up until now, waiting and watching. Everyone was curious to see how the president’s economic experiment would end. The answer: not well. But of course, it’s not the Republican’s fault. The scapegoat? The data provider. The firing of the Bureau of Labor Statistics chief only added fuel to the dollar’s collapse.
EUR/USD’s surge was driven less by the modest July non-farm payroll gain of 73 thousand, and more by the downward revision of May–June figures by a total of 260 thousand — the biggest adjustment since the 2020 pandemic. As a result, the Fed ended up with three bad jobs reports in a row. Had FOMC officials seen the full picture a few days earlier, they likely would have cut the federal funds rate at their July meeting.
US Job Data Revisions
Source: Bloomberg.
In the end, it wasn’t only Jerome Powell who faced criticism — the Bureau of Labor Statistics came under fire as well. Trump once again called Powell “the man who’s always late,” urged him to resign, and told the FOMC to step in and override his next vote to keep rates steady.
The president can’t fire the Fed chair, but he had no trouble dismissing the head of the BLS, accusing her of intentionally downgrading the jobs data to make the administration look bad, allegedly manipulating statistics for political purposes. The problem is, without this sudden deterioration in the labor market, the Fed would have likely kept holding rates despite Trump’s pressure. The problem is, it was his own anti-immigration stance and mass layoffs in the public sector that dragged employment down in the first place. Still, true to form, the president ignores the beam in his own eye while pointing out specks in others. Yes, the circus really has arrived in America.
Despite efforts by the Fed’s former hawks, including New York Fed President John Williams, to save face, the market is returning to its previous narrative. Labor market weakness, the president’s attacks on Powell, and the firing of the BLS chief have revived the “sell America” theme. That’s why both the dollar and stock indices are falling.
Odds of a Fed Rate Cut in September
Source: Wall Street Journal.
Weekly Trading Plan for EURUSD
The futures market has pushed the odds of a September Fed rate cut from 35% to over 80%. And EUR/USD surged right alongside them. Why should investors care about the eurozone’s problems when the US economy is ready to fall off a cliff? In these conditions, as long as the euro holds above $1.1545, buying remains the preferred strategy.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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