The US dollar's weakness has returned and so have the buyers for EUR/USD, and with rate cut expectations climbing again, the pair could have more room to run. But what's really interesting here is that seasonality might be backing the move too.
Over the past 20 years, EUR/USD has shown a strong tendency to drift lower between August 5th and 15th, with about a 68% win rate for short trades during that window. But more recently, the pattern has been less effective. If you look at the last 10 years, the pair tends to find a bottom around the 16th of August, and then tops out toward the end of the month.
That shift is important, especially when you zoom out and look at the USD macro landscape right now.
What’s Pressuring the Dollar?
There are a few things weighing on the greenback:
Weak US Jobs Data
Last week’s NFP print missed across the board, but the real concern came from the massive downward revisions. The 3-month average now sits around 36k a sharp slowdown that’s hard to ignore. Markets are starting to question the underlying strength of the US labor market.Rate Cut Bets Are Back
Before the jobs data, there was already some chatter about a possible rate cut in September, but after the report, those odds surged from around 63% to 96%. The market is now pricing in a cut next month, and Powell’s comments about "sticky inflation" haven’t been enough to cool that speculation.Fed Speakers Are Getting More Dovish
Despite holding rates steady, two FOMC members dissented at the last meeting, pushing for cuts. With more soft data expected in the weeks ahead (ISM, jobless claims, another NFP), it's hard to see the dollar regaining much bullish momentum unless we get a surprise reversal in the data.
EUR/USD and the Opportunity
The euro has already started to benefit from the dollar’s weakness but if seasonality holds, there may still be more upside left.
On top of that, the COT report shows hedge funds are holding near-extreme long positions in euro futures, whilst this adds an element of caution: a squeeze higher could be on the cards, especially if incoming US data continues to disappoint.
Something to Watch
Right now, EUR/USD could continue higher for the following reasons:
USD macro weakness
Rate cut momentum
Seasonal bullish bias
Positioning support from COT reports
It seems that the forex pair has some decent backing, let’s see if the price can continue higher.