Euro advances as US labor data disappoints

• EUR/USD gains 0.2% and trades near 1.1560, extending its recovery toward the top of the recent range.
• ADP Employment Change rose by just 44K in July, badly missing the 70K forecast and slowing from 98K.
• Reuters reports Iran and Oman are in the final stages of drafting an agreement on Strait of Hormuz shipping.

EUR/USD trades on the front foot near 1.1560 on Wednesday, adding around 0.2% as a weak United States (US) labor market report undermines the US Dollar (USD). The US Dollar Index (DXY) slips 0.22% toward 99.70, remaining below the 100.00 threshold, while the pair pushes toward the upper boundary of the range that has contained price action since late July.

The ADP Employment Change rose by 44K in July, missing expectations of 70K and slowing from 98K in June. The report follows Tuesday's weaker-than-expected JOLTS Job Openings data, which showed vacancies falling to 7.359 million, and points to a labor market losing momentum more quickly than the activity surveys had suggested.

Meanwhile, the ISM Services Purchasing Managers Index (PMI) edged up to 54.1 in July from 54 in June but fell short of the 54.5 market forecast. The internals carried a mixed message: the Employment Index tumbled to 47.4 from 51.2, dropping into contraction and corroborating the ADP shortfall, while New Orders jumped to 57.2 from 55.1. The Prices Paid component climbed to 70.3 from 67.7, an unwelcome combination for the Federal Reserve (Fed) of cooling employment alongside firming services costs.

Geopolitics continues to shape the broader risk backdrop. Reuters reported that Iran and Oman are in the final stages of drafting an agreement on how to handle commercial shipping through the Strait of Hormuz, an arrangement that would give Tehran greater control over vessels transiting the waterway. Citing a senior Iranian source involved in the negotiations, the agency added that Tehran has already abandoned its original demand for full control over traffic in both directions but is not expected to soften its stance further. President Donald Trump has said a deal could be announced within days, although officials familiar with the talks have cautioned that the outcome remains uncertain.

Attention now shifts to Friday's Nonfarm Payrolls report, the week's decisive event. With ADP and the ISM employment gauge both flagging a deterioration in hiring, a soft official print would confirm the trend and likely accelerate the Dollar's decline, opening the door for EUR/USD to challenge the highs.

Short-term technical analysis:

On the 4-hour chart, EUR/USD trades at 1.1558. The pair holds a constructive bullish bias as it tests a nearby pivot at 1.1558 while remaining underpinned by a cluster of supports just below, including the short-term 20-period Simple Moving Average (SMA) around 1.1527 and a horizontal level at 1.1543. The longer-term 100-period MA at 1.1443 stays well below current price, reinforcing the broader upward tone, while the Relative Strength Index (RSI) hovering just under the overbought band near 69 suggests firm but mature bullish momentum.

On the downside, initial support is seen at 1.1543, followed by 1.1532 and the 1.1527 zone where the 20-period MA converges with a horizontal level, forming a dense demand area; a break below that region would expose the deeper 100-period MA support near 1.1443. On the topside, a sustained break above the immediate pivot at 1.1558 would open the door to further gains, with momentum conditions hinting that buyers could attempt to extend the advance as long as the nearby support band continues to hold.

(The technical analysis of this story was written with the help of an AI tool. Know more.)