EUR/USD hovered below the 1.12 handle on Tuesday as it remained largely in a holding pattern that is likely to persist until it exits the current data vacuum.

After Friday’s dovish speech from Fed Chair Jerome Powell, it will take incoming labor market data, particularly the August payrolls print, to alter the narrative for the dollar.

From a markets perspective, Powell’s speech appeared to keep the risk of a 50bps rate cut firmly on the table, and his focus on the labor market put the spotlight on the next payrolls release to ultimately determine whether the Fed take a gradual step at 25bps or shift to the faster pace of 50bps.

Currently, the probability of the latter sits at 35%.

That said, despite the euro capitalizing on the dollar sell-off, euro zone growth remains anemic, as evidenced by the recent PMI data, which does suggest that the euro is not the obvious destination for dollar outflows, thus indicating a potential headwind for EUR/USD.

Elsewhere, Wednesday marks corporate month-end, which typically coincides with dollar strength.
With this in mind, traders may look to take profit on EUR/USD longs.

Near-term support at the 100-hour MA (1.1152), which has defined the August uptrend, has thus far kept dips rather shallow.
A break below would likely open the door to the pre-Powell level at 1.1114.

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