The U.S. dollar continued to weaken on Friday immediately after data showed that the Personal Consumption Expenditures (PCE) Index in the U.S. failed to exceed economists' forecasts, bringing the Federal Reserve one step closer to cutting interest rates this month.

Much now depends on U.S. labor market data. According to forecasts by many economists, employers showed little enthusiasm for hiring in August, which will likely push the unemployment rate to nearly a four-year high. This would serve as direct evidence of labor market stagnation.

Economists expect that around 75,000 jobs were created in August, with the unemployment rate rising to 4.3%. Four consecutive months of job growth below 100,000 would mark the weakest stretch since the pandemic began in 2020.

However, beyond stating the fact, it is important to analyze the reasons behind this situation. Experts point to a number of factors, including ongoing economic uncertainty linked to the geopolitical environment and tariffs. Many companies, particularly in the small and medium-sized business sector, prefer to remain cautious, delaying staff expansion until the broader economic picture becomes clearer.

The Federal Reserve's restrictive stance is also a key factor putting pressure on the labor market. That is why Friday's employment data from the Bureau of Labor Statistics will be essential information for Fed policymakers ahead of their September meeting. Several Fed officials have already noted that sluggish hiring in recent months means the committee should proceed with its first rate cut this year. This week, traders will continue to analyze comments from Fed officials, including regional presidents Alberto Musalem of St. Louis, John Williams of New York, and Austan Goolsbee of Chicago.

Seeking to secure stronger job growth, President Donald Trump is attempting to use tariffs to correct trade imbalances, encourage long-term investment, and stimulate domestic production of key goods and materials.

Markets will also watch for further action from the U.S. administration after a federal appeals court ruled most of Trump's tariffs unlawful, stating he exceeded his authority by imposing them under emergency law. However, judges allowed the tariffs to remain in place while the case is under review.

Other data due in the upcoming holiday-shortened week include August surveys of manufacturers and service providers conducted by the Institute for Supply Management. On Thursday, government data is expected to show a sharp widening of the trade deficit in goods and services in July after preliminary figures indicated a surge in imports ahead of higher tariffs.

Current Technical Picture

EUR/USD: Buyers now need to push through 1.1715. Only then will the pair be able to target a test of 1.1750. From there, a move toward 1.1780 is possible, though achieving this without support from major players will be quite difficult. The ultimate target is the 1.1820 high. In the event of a decline, I expect significant action from large buyers only around 1.1685. If there is no support at that level, it would be better to wait for a retest of the 1.1655 low or consider opening long positions from 1.1630.

GBP/USD: Pound buyers need to overcome the nearest resistance at 1.3540. Only this will open the path toward 1.3565, above which a breakout will be challenging. The ultimate target is 1.3590. If the pair declines, bears will attempt to gain control at 1.3495. A break of this range would deal a serious blow to bulls' positions and push GBP/USD down to 1.3470, with the prospect of extending losses to 1.3440.