The new week will be significant for traders of the EUR/USD pair. While the overall economic calendar is not packed with significant events, the market's focus will be on two reports capable of shaping the medium-term trend: the US NFP and the CPI growth report.
Typically, these reports are not released in the same week. Nonfarm Payrolls are published at the beginning of each month, while inflation data comes about 14 days later. However, the 2025 shutdown has muddled the timelines. Due to the 40-day US government shutdown, the BLS is releasing statistics with delays. For instance, we'll only learn the October data on labor and inflation.
Nonetheless, these reports have the potential to trigger significant volatility in the EUR/USD pair (and other dollar pairs). The releases may either strengthen or weaken the "dovish" expectations regarding the Federal Reserve's future actions.
Currently, the market is doubtful that the Fed will resort to additional rate cuts in the first half of next year. According to the CME FedWatch tool, the probability of a rate cut at the January meeting is currently only 23%, and for the March meeting, it's 41%. If the aforementioned reports come out in the "red zone," the "dovish" expectations will increase, putting additional (and quite substantial!) pressure on the dollar. For the EUR/USD pair, this means buyers may not only secure themselves above the 1.1740 resistance level but also test the 18th figure.
Preliminary forecasts suggest that the Nonfarm Payrolls will not favor the greenback. For example, the unemployment rate in October is expected to rise to 4.5%. If the figure hits the predicted level (or higher), it will mark a multi-year record (4.5% being the highest since October 2021). Moreover, in such a scenario, it would be reasonable to speak of an upward trend. Unemployment has consistently risen for three months (from July to September), and October could become the fourth month in this streak.
The growth in non-farm employment is expected to be around +55,000, down from the 119,000 increase in the previous month. This is a very weak result, but for dollar bulls, this indicator must remain above zero. It's worth noting that October's ADP report came in unexpectedly negative, reflecting a 32,000-job reduction in the private sector. Although the ADP and NFP reports do not always correlate, this is still a concern for EUR/USD sellers.
The "wage" indicator may also disappoint dollar bulls. The average hourly earnings increase has stood at 3.8% year-on-year over the previous two months, but is expected to slow to 3.7% in October.
The labor force participation rate is expected to decrease to 62.2% after two months of rising (from 62.4% in September).
As we can see, the forecast is not favorable for the greenback. If, despite such weak forecasts, the release comes out in the "red zone," the EUR/USD pair will likely attempt to approach the 18th-figure boundaries.
A day after the Nonfarm Payrolls are published—on December 18—the Consumer Price Index will be released in the United States. In September, it accelerated to 3.0% year-on-year, marking the highest level since January of this year. According to forecasts, in October this figure is expected to show upward momentum again, rising to 3.1% year-on-year.
The core Consumer Price Index, excluding food and energy, slowed slightly in September to 3.0% from 3.1% the previous month. Most analysts believe that in October, this indicator will return to 3.1%.
In other words, based on the forecasted figures, a somewhat contradictory situation emerges: the NFP may put pressure on the US currency, while the CPI could "rehabilitate" it. If both reports come out in the red zone, buyers of EUR/USD may solidify above the 1.1740 resistance level (the upper Bollinger Bands line on the daily chart) and likely attempt to overcome the next price barrier at 1.1800 (the upper Bollinger Bands line on the weekly chart). Conversely, if the releases show a "green" print, the pair may revert to the base of the 16th figure.
Of course, the economic calendar for the upcoming week contains other macroeconomic reports relevant to EUR/USD. For instance, the Empire Manufacturing index will be published on Monday, followed by PMI indices and ZEW data on Tuesday, along with retail sales data in the US; on Wednesday, the German IFO indices will be released; on Thursday, Unemployment Claims; and on Friday, data on existing home sales in the US and the University of Michigan consumer sentiment index. Additionally, the European Central Bank's December meeting will take place on Thursday.
However, all these events and releases will play a secondary role. All eyes will be on the key reports of the week—CPI and NFP —for EUR/USD traders. It is important to note that after the December meeting, Fed Chair Jerome Powell expressed concern about the state of the US labor market while acknowledging that inflation remains at an unacceptably high level. In this context, he stated that there is no predetermined trajectory for rate cuts—the direction will depend on the dynamics of key macroeconomic indicators (primarily in the labor market and inflation).
Given this preview, one can confidently say that the NFP and CPI reports will set the tone for trading the EUR/USD pair, as they have the potential to tip the scales one way or another—either towards a wait-and-see stance or a dovish scenario.
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