EUR/USD holds steady around 1.1135-40 area, just above one-week low set on Thursday

• EUR/USD edges higher on Friday and draws support from subdued USD price action.
• The fundamental backdrop warrants caution before placing aggressive directional bets.
• Traders also seem reluctant ahead of the crucial FOMC/ECB policy meetings next week.

The EUR/USD pair ticks higher during the Asian session on Friday, albeit lacks bullish conviction and currently trades around the 1.1135-1.1140 region, just a few pips above over a one-week low touched the previous day.

The US Dollar (USD) is seen consolidating the overngith strong gains led by the upbeat US Jobless Claims data and turning out to be a key factor acting as a tailwind for the EUR/USD pair. It is worth recalling that the number of Americans filing for unemployment insurance for the first time fell by 9K, to 228K during the week ended July 15, marking the lowest reading since mid-May. The data pointed to a still tighth labour market and reaffirmed market bets for a 25 bps rate-hike by the Federal Reserve (Fed) in July.

Adding to this, doubts that the Fed will commit to a more dovish policy stance act as a tailwind for the USD. The shared currency, on the other hand, is undermined by the fact that European Central Bank (ECB) officials recently delivered mixed signals regarding the next policy moves after the July meeting. Even a more hawkish ECB policymaker, Klaas Knot said that rate hikes later this year may not be necessary. Investors, however, seem convinced that the ECB will increase borrowing costs in July and September.

This, in turn, warrants some caution before placing aggressive directional bets around the EUR/USD pair and positioning for an extension of the recent retracement from the 1.1275 region, or the highest level since February 2022 touched earlier this month. Market participants might also prefer to move to the sidelines ahead of next week's key central bank event risks - the highly-anticipated FOMC monetary policy decision on Wednesday, followed by the crucial ECB policy meeting on Thursday.

Nevertheless, the EUR/USD pair remains on track to register weekly losses and remains at the mercy of the USD price dynamics in the absence of any relevant market moving economic relesaes, either from the Euro Zone or the US.

Technical levels to watch