Buy EURUSD as U.S. unemployment rises above 4.3%

Ahead of the Fed's September 17-18 meeting, investors are keeping a close eye on the last economic reports on the labor market, which could make significant adjustments to the Fed's final decisions.

The Federal Reserve is increasingly attentive to the U.S. labor market. At this meeting, their assessment of the labor market will be crucial to how significantly they cut an interest rate.

Experts largely expect the Fed to limit the cut to a quarter percentage point, given that employers continue to hire new employees, although at a slower pace than before, and the unemployment rate is on the rise but still at a relatively low 4.3%.

But data released Wednesday showing that job openings in July fell to the lowest level in three and a half years could reinforce the sense that the labor market is approaching a tipping point and could warrant a larger rate cut.

The ratio of job openings to jobseekers, which Fed Chairman Jerome Powell and other U.S. central bankers say they are closely monitoring, is now below its pre-pandemic average.

After this report, financial markets increased bets on more significant rate cuts. Rate futures contracts now see a half-point cut almost as likely as a quarter-point cut.

The upcoming release of the monthly jobs report on Friday and the August consumer price index data next week will allow the Fed to make a final decision on the size of the upcoming cut.

If one accepts the scenario that the Fed will cut the interest rate by 0.5% at once, one would see a sharp short-term strengthening of EURUSD. The possibility of such a rate cut will increase if Friday's labor market data shows a cooling below forecast estimates.

The final recommendation is to buy EURUSD in the short term, provided that the US unemployment rate exceeds the 4.3% level.

The profit could be fixed at the level of 1.1150. A Stop-loss could be placed at 1.1050. 

The volume of the opened position should be set so that the value of a possible loss, defined with a protective stop order, does not exceed 2% of your deposit.