8 September 2025,05:55
Daily Market Analysis
8 September 2025, 05:55
Key Takeaways:
*Rates expected to remain unchanged as inflation eases toward 2% while growth momentum weakens.
*Eurozone GDP slowed to 0.1% QoQ, but labor market strength (unemployment at 6.2%) continues to support consumption.
*Markets watching for hints on rate-cut timing; a dovish tilt could pressure the euro despite its recent stability.
Market Summary:
The euro is trading within a contained range against major counterparts as markets await the European Central Bank’s monetary policy decision on Wednesday. The Governing Council is widely anticipated to maintain interest rates at current levels, reflecting a balanced but cautious approach amid mixed economic signals.
Recent data has offered a nuanced view of the eurozone economy. Inflation has eased notably, moving closer to the ECB’s 2% target and reducing pressure for additional tightening. At the same time, growth momentum has softened—GDP expanded just 0.1% quarter-on-quarter in the second quarter, down from 0.6% in the prior period—highlighting concerns around economic resilience. Still, the labor market remains a source of strength, with the unemployment rate holding at a multi-year low of 6.2%, supporting household incomes and consumption.
This combination of moderating inflation, subdued growth, and robust employment has allowed the ECB to emphasize policy stability, providing underlying support for the euro. President Christine Lagarde’s post-meeting communication will be closely scrutinized for signals regarding the timing of potential rate cuts, particularly whether the bank will prioritize supporting growth amid signs of softening activity.
The euro’s steady performance also reflects a broader equilibrium in FX markets, with traders balancing eurozone stability against evolving Fed policy expectations. Should the ECB strike a more dovish tone than expected, the single currency may face near-term pressure; however, its recent resilience suggests a well-anchored outlook absent major surprises.
The EUR/JPY pair opened the week with a significant gap higher, breaking decisively above the major resistance level at 173.25—a threshold that had contained upward moves in previous sessions. The breakout signals a potential shift in near-term momentum, further supported by the pair moving out of its prior pattern of lower lows, confirming a structural improvement in sentiment.
Momentum indicators are aligning with the bullish price action. The Relative Strength Index is holding above its midline and approaching overbought territory, reflecting sustained buying pressure. Simultaneously, the Moving Average Convergence Divergence is on the verge of a bullish crossover—often referred to as a “golden cross”—just below the zero line, suggesting that a new phase of upward momentum may be beginning.
The pair now faces interim resistance near the 174.00 psychological level, with a clear break above likely accelerating gains toward the next significant technical zone near 175.50. Should the momentum indicators continue to strengthen—particularly if the MACD completes its crossover and moves above zero—additional follow-through buying is anticipated.
Resistance level:174.60, 175.55
Support level: 173.20, 172.25
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