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Scotiabank strategists Shaun Osborne and Eric Theoret note EUR/USD has slipped to the upper 1.15s, with sentiment turning bearish despite supportive yield spreads. They link the renewed deterioration to rising Oil prices and concerns over Euro area terms of trade. Spot is now drifting below their narrow fair value estimate of 1.1619, and technical focus has shifted toward lower support levels.

Bearish sentiment outweighs spread support"The EUR is soft, down a modest 0.2% vs. the USD with a drift to a fresh two week low into the upper-1.15 area. The domestic release calendar has once again quieted down, forcing market participants to focus on broader themes."

"Measures of EUR sentiment have shifted bearishly over the past week or so, ending a brief period of bullish-leaning risk reversals in mid/late August."

"The renewed deterioration looks to have coincided with the latest recovery in oil prices, sparking concerns about the euro area’s terms of trade as a major energy importer. "

"The support offered by higher yield spreads appears to be overwhelmed by the turn in sentiment, with spot drifting below our narrow FV estimate at 1.1619."

"EUR/USD short-term technicals: Neutral – the RSI is still close to the neutral threshold at 50 but it has just – barely – broken below into bearish territory. The latest bearish turn in EUR has shifted our focus to the downside, and we now look to near-term support at 1.1520 following the latest drift below 1.1580."

"We also note the potential for additional support closer to the 50 day MA (1.1499). Near-term resistance is expected in the 1.16/1.1620 range. The medium-term range from mid-2025 remains flat with wide congestion centered around the mid-1.16s."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

EUR/USD consolidates its daily losses during American trading hours on Wednesday as the US Dollar (USD) holds firm, supported by hawkish Federal Reserve (Fed) expectations and escalating tensions in the Middle East. However, weaker-than-expected United States (US) labour market data and a modest pullback in US Treasury yields limit the Greenback’s advance. At the time of writing, the pair trades around 1.1580, down -0.11% on the day.

The ADP Employment Change showed that US private-sector payrolls increased by 38K in August, below market expectations of 47K and the upwardly revised July increase of 46K. The figures point to slowing hiring ahead of Friday’s Nonfarm Payrolls (NFP).

US Treasury yields ease across the curve on Wednesday but remain close to recent highs. The benchmark 10-year yield trades around 4.78% after briefly touching 4.81%, its highest level since October 2023. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.74 after reaching a two-week high near 99.87.

New York Fed President John Williams said on Wednesday that “yields are rising on a strong economy and strong outlook,” adding that they “don’t seem to be driven by the inflation outlook.” Williams noted that “there is a correlation between bond yields and the Middle East conflict.”

The broader outlook continues to favour the Greenback as traders increase bets that the Fed could raise interest rates as soon as September, particularly after Fed Chair Kevin Warsh adopted a tougher stance on inflation at the Jackson Hole Symposium last week. According to the CME FedWatch tool, the probability of a rate hike at the September 15-16 meeting stands at around 70%, up from 36% a week ago.

Escalating hostilities between the US and Iran are also supporting the Greenback while weighing on the Euro. The latest exchange of strikes has pushed Oil prices higher, fuelling inflation concerns and raising expectations that major central banks could keep monetary policy restrictive for longer.

Against this backdrop, the European Central Bank (ECB) is widely expected to raise its deposit rate by 25 basis points to 2.50% at its September 9-10 meeting, marking its second increase this year. Preliminary Eurozone inflation data for August showed that the Harmonized Index of Consumer Prices (HICP) accelerated to 3.3% YoY from 2.9% in July, strengthening the case for another rate hike. Looking ahead, the Eurozone Producer Price Index (PPI) is due on Thursday, followed by Retail Sales data on Friday.

Economic Indicator Nonfarm Payrolls The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews ​and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

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America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

The Euro-Dollar rate has slipped to 1.1574, but UBS sees recovery towards 1.18–1.20 as limited policy divergence contains FX volatility. The Euro to Dollar (EUR/USD) exchange rate has fallen back to 1.1574 after its late-August recovery ran out of momentum above 1.17.

The reversal has left the live EUR/USD rate near the bottom of its latest trading range, with the pair down around 0.15% on Wednesday morning.

At current levels, the bottom of UBS’s 1.18–1.20 forecast range would represent an advance of roughly 2%, while the upper boundary implies potential gains approaching 3.7%.

Image: EUR/USD 48-hour chart The 48-hour chart captures the change in tone: EUR/USD briefly touched 1.1624 before sliding towards 1.1573, just above the period low of 1.1568.

Neutral Euro View, Higher EUR/USD Range UBS stated: “We remain Neutral on the EUR and expect EURUSD to move back between 1.18-1.20, while GBP and NOK remain Attractive given their yield appeal.”

UBS is not predicting a powerful, one-way Euro rally, but it does expect the recent Dollar rebound to fade enough for EUR/USD to revisit higher levels.

The bank’s view rests partly on the absence of a large and persistent interest-rate gap between the major central banks.

“We believe limited monetary policy divergence should keep FX volatility contained, supportive of selective exposure to pro-growth, carry currencies.”

This leaves UBS broadly aligned with Rabobank’s 1.18 EUR/USD forecast, although the UBS range allows for a more substantial move towards 1.20.

European Growth Offers Some Support The European growth picture is another part of the argument.

UBS said: “Eurozone and UK growth continue to outperform expectations, as higher borrowing costs have had limited impact on activity and higher energy prices have yet to materially weigh on growth (we forecast Eurozone GDP growth of +0.8% in 2026, +1.2% in 2027, and UK: +1.1% in 2026 and 2027).”

It also expects another European Central Bank rate increase: “Thus, we expect the ECB to hike once more in September, to 2.5% before pausing, and the BoE to hold policy rates at 3.75% through year-end 2026.”

Image: EUR to USD exchange rate 3-month chart The three-month chart offers a less bearish picture than the latest sell-off alone, with EUR/USD still above its rising 50-day moving average despite retreating from August’s 1.1711 high.

The immediate tests will come from US employment data and the September ECB decision.

Further Dollar strength could put 1.15 back in play first, but a cooling in US yields would bring UBS’s 1.18 recovery target into clearer view.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

Euro/US Dollar (EUR/USD): Arc cycle analysis

Overview: Based on Arc Cycle Analysis applied to the 4h chart, Euro / U.S. Dollar is trading between the 0.618 Arc and 0.786 Arc within the current Arc Cycle. Price is oscillating between these boundaries, progressing through a mid-cycle consolidation phase toward the lower Arc level.

Metric

Reading

 Market Bias

Neutral-Bearish

 Preferred Scenario

Two-Way Navigation Within the Current Arc Range

 Target Arc

0.786 Arc

Potential Counter-Move

A counter-move toward the upper Arc may occur before bearish continuation.

 Current Arc Level

In Transit Between Arcs (0.618 Arc to 0.786 Arc)

 Cycle Status

Mid-Cycle Migration Phase

Market outlookPrice is actively trading between the 0.618 Arc and the 0.786 Arc, indicating that the market is navigating through the current Arc Cycle toward the lower Arc boundary. While price may experience a pullback toward the 0.618 Arc, the broader cycle structure remains oriented toward a test of the 0.786 Target Arc.

The EUR/USD pair loses traction to near 1.1575 during the early European session on Wednesday. The US Dollar (USD) strengthens against the Euro (EUR) amid hawkish Federal Reserve (Fed) stance and escalating Middle East geopolitical tensions. Traders will keep an eye on the Eurozone Retail Sales and US employment data, which are due on Friday. 

Iran’s Islamic Revolutionary Guard Corps (IRGC) claimed it has launched a “heavy” ballistic missile attack on Prince Hassan airbase and a US Marine base in Jordan in response to earlier US strikes that killed civilians. 

The US military said that its forces completed a wave of strikes against Iranian targets on Tuesday after what it said were attempted attacks by Iran against commercial shipping and American service members. Signs of rising tensions in the Middle East boost the safe-haven flows, supporting the Greenback and creating a headwind for the major pair. 

Furthermore, Fed Chair Kevin Warsh’s hawkish remarks at the Jackson Hole symposium might contribute to the USD’s upside. Warsh warned last week that policymakers may need to tighten again if inflation fails to move convincingly towards 2%. Traders raise their bets on a September rate hike after Warsh’s comments.

Expectations of a September Fed rate hike rose to 68%, up from below 40% before the speech, according to the CME FedWatch tool.  

Eurozone inflation risks keep ECB bias tilted toward further tighteningBNY’s Geoff Yu highlights that ECB officials remain wary of the inflation outlook, noting that one policymaker “warned that prolonged disruption could sustain inflation pressure even without a wage-price spiral.” According to Yu, “that framing reinforces the path toward another ECB hike in September”: in his view, “policymakers appear increasingly unwilling to wait for second-round effects before acting,” with the ECB “more assertive than its peers” in leaning against the risk that price pressures become entrenched.

Technical Analysis: EUR/USD retains a neutral outlook in the near termIn the daily chart, EUR/USD sits just above the 100-day simple moving average (SMA), which lends immediate support, but it remains below the 20-day Bollinger middle band, leaving spot marginally capped within its recent range. The Relative Strength Index (RSI) at 49.8 is effectively neutral, suggesting directionless momentum as price consolidates between nearby support and overhead resistance bands.

On the topside, the immediate resistance level is located at 1.1600, representing the Bollinger middle band and the psychological level. A more significant barrier is seen at the upper Bollinger band near 1.1710, where recent rallies would likely face supply. 

On the downside, immediate support is defined by the 100-day SMA at 1.1565. A break below this level would expose the lower Bollinger band around 1.1490, opening the door to a deeper pullback within the broader consolidation.

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

Euro FAQs The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

The shared currency edges lower, capped by the 200-day Simple Moving Average (SMA) at 1.1633, amid rising geopolitical tensions and escalating hostilities between the US and Iran, prompting investors to buy the US Dollar. At the time of writing, the EUR/USD trades at 1.1590, down 0.25%.

The EUR/USD retreats below the 200-day SMA towards the 100-day SMA at 1.1569, the first support area.  The Relative Strength Index (RSI) I above 50, bullish but aims lower, a signal that sellers are gaining strength.

For a bearish continuation, the EUR/USD must clear the 100-day SMA. This will expose the August 13 swing low of 1.1511, followed by the 50-day SMA at 1.1494. Below, the next support is the 1.1400 psychological level, before the trend resumes lower highs and lower lows.

Buyers must push the pair above the 200-day SMA, ahead of the 1.1700 psychological level. A decisive breakout will expose the May 6 high at 1.1796.

Euro FAQs The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

The Euro (EUR) trades 0.2% lower to near 1.1593 against the US Dollar (USD) during the European trading session on Tuesday. The major currency pair is under pressure as the US Dollar outperforms its peers due to increased expectations that the Federal Reserve (Fed) will raise interest rates in the near term.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is up 0.2% to near 99.60.

Hawkish Fed expectations are supported by the Fed’s commitment that it will act to bring inflation down to the 2% target.

Fed chair Warsh strikes more hawkish tone on inflation pathAnalysts at Rabobank note that Fed Chair Kevin Warsh “appeared to rebuild some of his credibility as an inflation fighter” in his first address to the annual Jackson Hole Symposium, emphasising that the Fed still has “work to do” to bring inflation back to its 2% target. They argue that the remarks represent “an important shift” from the communication strategy he has followed since taking office, with Warsh, for the first time as Chair, explicitly voicing dissatisfaction with recent inflation developments.

Rabobank highlights that Warsh also signalled he was open to further rate hikes unless underlying inflation shows a more convincing improvement. As he put it, “We must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do.”

Meanwhile, investors shift their focus to the United States (US) ISM Manufacturing PMI data for August and the US JOLTS Job Openings data for July, which will be published at 14:00 GMT.

On the Eurozone front, the preliminary Harmonized Index of Consumer Prices (HICP) data for August comes in higher at 3.3% Year-on-Year (YoY), as expected, against 2.9% in July. The core HICP growth cooled down to 2.4%, while it was expected to remain steady at 2.5%.

EUR/USD Technical Analysis

In the four-hour chart, EUR/USD trades at 1.1594, keeping a bearish near-term tone as it holds beneath the 20-period exponential moving average (EMA) at 1.1618. The pair is capped by this short-term EMA resistance, while the Relative Strength Index (RSI) at 36 stays below neutral, hinting at persistent downside pressure rather than an oversold condition.

On the topside, immediate resistance is defined by the 20-period EMA at 1.1618, which would need to be reclaimed to ease the current bearish bias and allow for a more sustained recovery. Looking down, the 1.1580 level is expected to act as a key support area.

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

Economic Indicator Harmonized Index of Consumer Prices (YoY) The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

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Last release: Tue Sep 01, 2026 09:00 (Prel)

Frequency: Monthly

Actual: 3.3%

Consensus: 3.3%

Previous: 2.9%

Source: Eurostat

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Summary:

The EUR/USD remains vulnerable below 1.1621 as USD strength still remains despite Monday's pullback move to the upside. Current Setup Current sentiment: cautiously bearish EUR/USD.

The pair is up 0.33% on the day and trading around 1.1616. The modest intraday recovery comes as traders who were long USD take profits. However, sentiment still favors USD strength, and that is why this bias for EUR/USD is cautiously bearish. The Euro is getting some support from expectations of a potential rate hike by the European Central Bank in September, especially as renewed tensions between the US and Iran have driven oil prices higher and raised concerns about imported inflation in the Eurozone. 

Macro Drivers for the EUR/USD 1) Fed Hawkish Expectations

After the Fed Chair’s hawkish comments at the Jackson Hole symposium on Friday, 28 August, markets are now pricing in a much higher probability of a September Fed hike. US bond yields rose sharply, which continues to support the dollar while limiting the EUR/USD’s upside. This upside retracement was capped at 1.1621 on 31 August.

2) The ECB Policy Meeting

The ECB is also expected to raise rates in September in direct response to the hike in oil prices following the renewed tensions in the Middle East. Eurozone yields have also risen sharply, which should be ok to ward off a major euro sell-off unless the ECB disappoints and the Fed’s monetary policy expectations are repriced more hawkishly.

3) Geopolitics

Renewed US-Iran military tensions are keeping Brent crude above $90/barrel. This supports defensive positioning into the dollar, even as the risk of imported inflation makes an ECB rate hike more likely. Geopolitics is clouding the EUR/USD outlook, and the next two weeks should provide additional clarity on the situation.

Price Catalysts This Week 1. Non-Farm Payrolls: The major price catalyst this week is the Non-Farm Payrolls report. A weak payrolls report undermines any September Fed-hike expectations. This could strongly support EUR/USD amid ECB rate-hike expectations. However, a better-than-expected US jobs report favors additional dollar strength.

2. Other Macroeconomic Data: Other price catalysts include the US ISM Manufacturing PMI data and the Eurozone Core CPI Flash Estimates YoY (2.5% consensus vs 2.5% prior).

3. Brent crude prices: This is important to establish the level of defensive positioning into the US Dollars, and also the extent to which any ECB rate hike bets are repriced.

EUR/USD Weekly Forecast Scenarios Base case: EUR/USD remains under pressure below 1.1640.

Bull case: Euro gets support from hawkish ECB expectations. Additionally, weak US jobs data → fall in Fed hike expectations → weaker USD → allows EUR/USD to rebound toward 1.17.

Bear case: strong US jobs data + higher oil prices + hawkish Fed → reinforces USD strength. EUR/USD breaks 1.1570 and targets 1.1550.

EUR/USD Technical Outlook Technically, 1.1621 (31 August intraday high) is the next important resistance. Below it, EUR/USD remains vulnerable to 1.1577, followed by the 8 June and 4 August lows at 1.1506. A breakdown of 1.1577 support unlocks the downward path to a retest of the uncapped neckline of the completed double bottom at 1.1506.

On the flip side, a break of 1.1621 clears the pathway to 1.1682. A further move north brings in 1.1743, a potential pitstop before 1.1813 comes into the picture.

EUR/USD holds modest gains on Monday during American trading hours as the US Dollar (USD) struggles to build on Friday’s strength, which followed hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole Symposium. At the time of writing, the pair trades around 1.1595, up roughly 0.11% on the day.

The US Dollar rose about 0.55% on Friday and reached its highest level in more than a week after Warsh signalled that the Fed may need to tighten monetary policy further. He stressed that the central bank’s 2% inflation target is “firm” and said policymakers still “have work to do” unless underlying inflation moves toward the target at a sufficient pace.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.55 on Monday after reaching 99.72, its highest level since August 14. US Treasury yields also surged following Warsh’s speech, with the benchmark 10-year yield trading near 4.75% at the time of writing, its highest level since January 2025.

According to the CME FedWatch tool, markets are pricing in around a 61% chance that the Fed will raise interest rates in September, up from 38% before Warsh’s remarks.

On the Euro side, softer-than-expected preliminary German inflation data did little to alter expectations that the European Central Bank (ECB) will raise interest rates next month. Strategists at Brown Brothers Harriman note that Tuesday Eurozone inflation data should underscore lingering price pressures. In their view, “above target inflation and a firmer growth outlook give the ECB scope to normalize the policy rate towards the upper end of its estimated 1.75% to 3.00% neutral range.”

Reflecting this backdrop, BBH highlights that “the swaps curve has virtually fully priced in a 25bps ECB rate hike to 2.50% on September 10 and a total of 60bps of tightening over the next twelve months.”

At the same time, rising energy prices due to tensions in the Middle East are adding to concerns that inflation could stay above the Fed’s and ECB’s 2% targets for longer. This supports expectations of tighter monetary policy on both sides of the Atlantic.

However, the US Dollar is likely to retain the upper hand as hawkish Fed expectations, elevated Treasury yields and geopolitical tensions keep the Greenback supported in the near term. Attention now turns to this week’s US economic data, particularly Friday’s Nonfarm Payrolls (NFP) report, which could shape expectations for the September decision.

Inflation FAQs Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

EUR/USD kicked off Monday with an attempt to stabilise around 1.1587. Federal Reserve Chair Kevin Warsh returned support to the dollar with a hawkish performance at Jackson Hole. The key test now will be Friday’s US labour market report, which will show whether the case for another rate hike has sufficient backing from the economy. The US dollar has already recovered to a two-week high.

Warsh also stated that with inflation not slowing sufficiently, the regulator may need to tighten policy again. Markets now estimate the probability of a rate hike in September at approximately 57%, up from around 35% before his speech. The yield on two-year US Treasury notes climbed to 4.33%, further enhancing the appeal of dollar-denominated assets.

The main event of the week will be Friday’s August Nonfarm Payrolls report. Expectations point to an increase in employment of around 50,000, following an unexpected decline of 23,000 in July. Unemployment is projected at approximately 4.1%. Strong payrolls, combined with steady wage growth and a stable average working week, would support Warsh’s hawkish stance and may increase pressure on EUR/USD below 1.16. Weak data, on the other hand, would cast doubt on a September rate hike, lower yields, and help the euro recover.

Until Friday, markets will also monitor intermediate signals. US jobs data is due on Tuesday, followed later by private sector employment figures, jobless claims, and revised productivity statistics.

In Europe, eurozone inflation will be the main event, with expectations pointing to an acceleration to around 3.3%. A strong reading would reinforce expectations of an ECB rate hike in September and could partially offset the dollar’s support from the Fed.

Technical Analysis

On the H4 chart of EUR/USD, the market made a downward wave to 1.1567 today. A consolidation range is currently forming above this level, with a potential growth leg to 1.1597 not ruled out. Further decline to 1.1555 is expected. Technically, this scenario is confirmed by the MACD indicator-its signal line is below zero and pointing strictly downwards, reflecting continued bearish momentum with the potential for the downward trend to persist.

On the H1 chart, the market completed the next downward wave to 1.1576. A consolidation range is forming above this level. A growth leg to 1.1597 is expected, followed by the beginning of a decline to 1.1533, with the prospect of the wave continuing to 1.1511. Technically, this scenario is confirmed by the Stochastic oscillator-its signal line is below the 80 level and pointing strictly downwards to 20.

Conclusion EUR/USD has retreated to near two-week lows following Fed Chair Warsh’s hawkish Jackson Hole speech, which significantly raised market expectations for a September rate hike. The probability of a move has surged from 35% to 57%, supported by rising Treasury yields and a stronger dollar. Markets now look to Friday’s US payrolls report as the key test for whether the economy can withstand further tightening, with a strong reading likely to push EUR/USD below 1.16. Meanwhile, eurozone inflation data will be closely watched, with a strong print potentially reinforcing ECB tightening expectations and offering some support to the euro. Technically, the pair remains bearish, with further downside towards 1.1533 and 1.1511 likely in the near term.

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The EUR/USD pair trades in positive territory around 1.1590 during the early European trading hours on Monday. However, the potential upside for the major pair might be limited as traders ramped up bets on a rate hike after hawkish remarks by Federal Reserve (Fed) Chair Kevin Warsh. 

Fed Chairman said on Friday at the Jackson Hole economic symposium that the US central bank will "have work to do" if policymakers don't get the confidence they need that inflation is heading down to 2%.  His hawkish comments have fuelled expectations of a September rate hike, supporting the US Dollar (USD) against the Euro (EUR). 

Traders brace for the preliminary reading of Consumer Price Index (CPI) inflation data from Germany, which will be published later on Monday. Any signs of hotter inflation in Germany could lift the shared currency in the near term. 

Dollar sentiment firms as Fed repricing follows Warsh’s hawkish toneStrategists at Commerzbank highlight that “the main theme on Friday was the hawkish repricing of Fed expectations” in the wake of Fed Chair Kevin Warsh’s Jackson Hole speech. They note that Warsh warned inflation is “not meaningfully slowing” and reaffirmed that the Fed’s 2% inflation target is “firm and fixed,” while stressing that policymakers have “work to do” if they cannot be confident that underlying inflation is returning toward the target.

Warsh flags unfinished inflation fight, keeps Dollar bulls alertFed Chair Warsh delivered a notably more hawkish-leaning tone, with the FXS Speechtracker score at 7.4 versus a 6.5 historical average, underscoring heightened concern about price stability despite solid growth and stable labor markets. The insistence that the Fed must be confident underlying inflation is moving to objective or “we have work to do,” combined with comments that financial conditions are not restrictive and credit markets show few signs of policy restraint, points to a bias toward further tightening or a prolonged restrictive stance even as headline inflation data have improved but underlying trends are judged largely unchanged. Warsh’s emphasis that the Fed’s 2% PCE target is “firm and fixed” and that the predominant focus should be on prices reinforces a message that the inflation battle is not yet convincingly won, a backdrop that tends to support the Dollar on dips.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 129.70, signaling that the aggregate policy tone remains firmly in hawkish territory despite the July decision to wait. The combination of a high index level and an above-baseline FXS Speechtracker score suggests that markets will continue to price a vigilant Fed stance, with the Dollar likely to stay underpinned as long as inflation progress is viewed as incomplete.

Technical Analysis: EUR/USD is well-supported above the key 100-day SMAIn the daily chart, EUR/USD holds a mildly bullish near-term tone as spot remains above the 100-day simple moving average (SMA), while pressing just under the 20-day Bollinger SMA, which acts as an immediate pivot. The Relative Strength Index (14) at 52.8 sits slightly above its neutral line, hinting that buyers retain a modest advantage without reaching overbought conditions.

On the topside, initial resistance is aligned at the August 26 high of 1.1677. A stronger barrier emerges at the upper Bollinger band around 1.1710, en route to the May 8 high of 1.1788. 

On the downside, the 100-day SMA at 1.1570 offers first support, followed by the August 13 low of 1.1511. A more distant Bollinger lower band level is located near 1.1480, where a deeper pullback would likely encounter firmer buying interest.

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

Euro FAQs The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Dollar Index Price Chart – Source: Tradingview The U.S. Dollar Index is trading around 99.52 on the 2-hour chart after extending its recovery from the 98.56 low. Price has now risen above the 38.2% Fibonacci level at 99.49 and is currently testing the 23.6% retracement at 99.58. The recovery has been technically constructive, however, DXY is still approaching a heavier resistance zone at 99.58–99.73, where recent highs are located.

The short-term structure remains supported by the rising trendline and fair-value gap at 99.24–99.34. Immediate resistance is located at 99.58, and above that at 99.73, 99.83, and 100.03. On the downside, support is located at 99.49, and below that at 99.41, 99.34, and 99.24.

Looking at the bigger picture, I believe DXY is still in the process of recovering above 99.34–99.41. A break above 99.58 would strengthen the bullish case in the direction of 99.73–100.03, while a break above current resistance would likely result in a sell off back towards the 99.34 support zone.

Key Highlights

EUR/USD struggled near 1.1710 and started a downside correction. It traded below a bullish trend line with support at 1.1655 on the 4-hour chart. Gold prices dipped from $4,700 and tested the $4,420 support. Bitcoin started a consolidation phase below the $80,000 pivot level. EUR/USD Technical Analysis The Euro failed to settle above 1.1700 against the US Dollar. EUR/USD started a downside correction below 1.1680 and 1.1660.

Looking at the 4-hour chart, the pair traded below a bullish trend line with support at 1.1655. There was a clear move below the 50% Fib retracement level of the upward move from the 1.1511 swing low to the 1.1710 high.

The pair even spiked below the 100 simple moving average (red, 4-hour). If there are more losses, the pair might find bids near the 76.4% Fib retracement level at 1.1558.

The first major support could be near 1.1520 and the 200 simple moving average (green, 4-hour). A downside break and close below 1.1520 might start a major leg down. In the stated case, the bears could aim for a move to 1.1440. Any more losses could open the door for a test of 1.1420.

On the upside, EUR/USD could face resistance near the 1.1620 level. The next major resistance might be 1.1660. A close above 1.1660 could start another steady increase. In the stated case, the bulls could aim for a move to 1.1710. Any further gains might open the door for a test of 1.1750.

Looking at Gold, the price accelerated gains above $4,550, but failed to clear $4,700 and corrected some gains.

Upcoming Key Economic Events:

German Consumer Price Index for August 2026 (YoY) (Prelim) – Forecast +2.9%, versus +2.8% previous. German Consumer Price Index for August 2026 (MoM) (Prelim) – Forecast +0.2%, versus +0.8% previous. Chicago Purchasing Manager’s Index for August 2026 – Forecast 57.0, versus 57.6 previous.

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The week in one sentence: speculative positioning shifted more constructively in the week to August 25. CAD short covering led the move, followed by a broad reduction in EUR shorts and renewed Gold buying. GBP and VIX positioning also improved, while JPY positioning deteriorated and WTI flows diverged from weaker prices.

The Canadian Dollar's (CAD) non-commercial net shorts shrank by over 36.5K contracts to about 121.5K contracts, marking the biggest weekly improvement since mid-December. In contrast, USD/CAD traded with respectable losses, with modest CAD rising as positioning improved. Furthermore, the net positioning increased to the 21st percentile.

EUR: Shorts retreat sharplySpeculative net shorts in the Euro (EUR) shrank by around 22.7K contracts to more than 36.3K contracts, the strongest weekly improvement since mid-April. EUR/USD advanced markedly, even surpassing the 1.1700 barrier for the first time since early May, confirming the more constructive flow, although net positioning remains near the 10th percentile of its five-year range.

JPY, AUD and commodities divergeSpeculators added nearly 10.4K contracts to their net short positioning of the Japanese Yen (JPY), even as JPY gathered extra pace and prompted USD/JPY to trade with modest losses. The Australian Dollar (AUD) net shorts widened by just 296 contracts, despite a solid performance from AUD/USD, which finally exceeded the 0.7100 barrier. WTI net longs increased by almost 1.4K contracts amid a decent drop in the price of the barrel. Coffee (KC1) speculative positioning increased marginally by 107 contracts alongside a humble price gain.

GBP and VIX: Confirmation strengthensNet positioning in the British Pound (GBP) improved by just over 10K contracts, while GBP/USD picked up strong upside traction well north of 1.3600 the figure. Speculators trimmed their VIX net shorts by roughly 11.3K contracts, mainly because the reduction of gross shorts more than offset the decline in gross longs; the aka “panic index” traded with a positive footing although meeting resistance around the 16.00 zone, indicating that price and positioning delivered a second confirmation signal.

Gold: Buying acceleratesGold net longs went up by more than 21.1K contracts to just over 243.3K contracts, the biggest weekly rise since June 2. The precious metal navigated with firm gains over the reporting week, confirming the stronger flow and lifting exposure to the 99th percentile of its five-year range.

Positioning Map: Gold reaches an extremeGold exposure sits near the 99th percentile, the clearest crowded long in the report. AUD exposure is also elevated near the 81st percentile. At the other end, EUR net positioning remains near the 10th percentile and WTI near the 13th, despite this week's modest increase in Oil longs.

Dollar Index Price Chart – Source: Tradingview Currently, the U.S. Dollar Index is at $99.02, up slightly from $98.55 on the 2-hour chart. While the rebound gives some short-term momentum to the DXY, it still sits below both the 100-EMA at $99.22 and the 50-EMA at $99.02, with an overall downtrend remaining intact. Until this changes, the structure will continue to be bearish.

RSI also shows the short term rebound and is currently at 55, which shows a recovery from oversold conditions and a move back above the neutral 50 level. There is resistance at $99.13 and $99.27, and even further at $99.38 and $99.71. If buying pressure pushes the price above these, $100.03 and $100.42 will be the next targets. In the event downward pressure remains at $98.99, $98.82, and $98.55, there is still downside.

In my opinion, the DXY is still under pressure unless a break of the $99.38 level is made. A break of this resistance zone could be the catalyst to push to $98.82, $98.55. In the event an upward break is made from the $99.13 – $99.38 resistance zone, it would be very bullish.

GBP/USD Technical Analysis: Pound Consolidates Above $1.3618 With $1.3656 Resistance in Focus

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann keep a constructive stance on EUR/USD despite recent consolidation around 1.1660. They still see room for upside toward 1.1725 in the coming weeks as long as support at 1.1630 holds. On a 1–3 month horizon, they highlight a decisive technical break and positive weekly MACD, pointing to targets at 1.1800 and 1.1850.

Constructive bias with higher targets"24-HOUR VIEW: EUR rose to 1.1711 last Friday and then eased to close largely unchanged at 1.1679 (+0.01%). When EUR was at 1.1675 in the early Asian session yesterday, we indicated that EUR “could ease further, but any decline should stay within a range of 1.1645/1.1700.” EUR subsequently traded between 1.1655 and 1.1687. EUR closed modestly lower by 0.15% at 1.1662. The price action provides no fresh clues, and further range-trading appears likely, expected to be between 1.1650 and 1.1685."

"1-3 WEEKS VIEW: Tracking our positive EUR view from early last week, we highlighted on Thursday (20 Aug, spot at 1.1675) that “there is room for further upside in EUR toward 1.1725.” EUR subsequently tested the 1.1710 level twice, but it has since eased. That said, we will continue to hold the same view as long as EUR holds above 1.1630 (‘strong support’ level previously at 1.1615)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

The shared currency registers minimal losses of 0.13% versus the US Dollar as EUR/USD fails to surpass 1.1700, exacerbating the drop towards the 1.1660 area, despite retaining its current neutral-to-upward bias.

EUR/USD Price Forecast: Technical OutlookThe EUR/USD is poised to consolidate further, as price action has failed to extend the market structure of higher highs and higher lows. Momentum shifted bullish, as the Relative Strength Index (RSI) shifted overbought, an indication that bulls are in charge.

However, the path of least resistance for EUR/USD is for it to continue trading sideways.

For a bullish resumption, the first resistance for EUR/USD is 1.1700. A breach of the latter will expose the 1.1750 psychological level, followed by the May 6 high at 1.1795, ahead of 1.1800. On further strength, the next stop is the April 17 swing high of 1.1849.

On the downside, if EUR/USD dives below 1.1650, the next area of interest would become the 200-day Simple Moving Average (SMA) at 1.1631. Below this level lies the 1.1600 mark, followed by the 100-day SMA at 1.1574 and by 1.1500.

EUR/USD Price Chart – Daily

EUR/USD daily chart Euro Price Today The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD0.13%0.07%0.08%0.57%0.29%0.32%0.17%EUR-0.13%-0.03%-0.02%0.43%0.21%0.25%0.06%GBP-0.07%0.03%0.00%0.49%0.21%0.30%0.06%JPY-0.08%0.02%0.00%0.54%0.13%0.24%0.06%CAD-0.57%-0.43%-0.49%-0.54%-0.36%-0.19%-0.42%AUD-0.29%-0.21%-0.21%-0.13%0.36%0.08%-0.13%NZD-0.32%-0.25%-0.30%-0.24%0.19%-0.08%-0.23%CHF-0.17%-0.06%-0.06%-0.06%0.42%0.13%0.23% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

The Euro-Dollar rate is holding near 1.1660 as ING sees light Euro positioning and US policy risks keeping its 1.18 year-end target in play. The Euro to Dollar (EUR/USD) exchange rate slipped towards 1.1660 on Monday, giving back part of last week's surge while remaining comfortably above the levels seen through the first half of August.

Latest — Exchange Rates:

Euro to Dollar (EUR/USD): 1.166155 (-0.13%)

Pound to Dollar (GBP/USD): 1.362905 (-0.11%)

Dollar to Yen (USD/JPY): 159.16597 (+0.11%)

The pair was down around 0.15% on the session, after trading between 1.1655 and 1.1687, while August as a whole has still delivered gains of more than 1%.

Foreign exchange analysts at ING remain reluctant to call an end to the Dollar's broader retreat and retain exchange rate forecasts for EUR/USD at 1.17 by end-September and 1.18 at year-end.

“The dollar opens the week on a soft footing,” said ING's Chris Turner, adding that “most paths seem to lead to a weaker dollar” despite the potential for Fed Chair Kevin Warsh to upset that view later this week.

There is also room for positioning to do some work.

ING's latest futures-market analysis shows asset managers and leveraged funds buying Euro contracts, but the scale of those positions remains relatively modest.

“Speculators look quite underweight the euro,” Turner said, a backdrop which leaves scope for further EUR buying if US developments continue to undermine confidence in the Dollar.

That matters after last Wednesday's sharp EUR/USD breakout.

As we noted in our recent ING Euro outlook, the bank has increasingly viewed Dollar weakness rather than a dramatic Eurozone re-rating as the cleaner route towards higher EUR/USD levels.

Image: EUR/USD exchange rate 24h chart EUR/USD spent much of Monday grinding lower from the 1.1680 area, with late trade around 1.1660 leaving the pair close to the bottom of its daily range but still above ING's key support zone.

Near-Term EUR/USD Outlook: 1.1660/70 Becomes the First Test ING does not see much justification for a deep reversal at present.

“We do not really see the need for EUR/USD to come back sharply under support at 1.1660/70,” Turner said, although last week's breakout zone would become vulnerable if risk assets suffered a more substantial setback.

The immediate European calendar includes Germany's August Ifo survey, where ING expects another improvement following the sharp deterioration seen in March and April.

The more consequential risks sit in the United States.

Markets are digesting fresh US sanctions on Iran, renewed Canada-US trade tensions and questions over how Washington intends to address stress in the Treasury market, with the Dollar recovering modestly on Monday after hitting a three-month low against the Euro last week.

Wednesday's core PCE inflation release and Friday's Jackson Hole speech from Warsh should determine whether that rebound has legs.

ING warns the Jackson Hole address “could be a hawkish event risk for the dollar”, particularly if Warsh doubles down on the Fed's inflation-fighting credentials after his July press conference unsettled the long end of the Treasury curve.

Even so, the bank is not changing its central FX call yet.

“At present, we are happy with our current forecasts for EUR/USD at 1.17 end September and 1.18 for end year,” Turner said, while acknowledging that those projections will be reviewed this week.

That 1.18 year-end target also arrives sooner than the median path in our latest EUR/USD bank forecast survey.

For now, 1.1660/70 is the useful dividing line: holding it leaves ING's bullish path intact, while a decisive break would suggest last week's Dollar-driven surge ran too far, too quickly.

Summary:

This week's Jackson-Hole symposium and the US Treasury's bond buyback program are the defining factors for this week's EUR/USD forecasts. Current Setup and Live Chart The EUR/USD enters the new week with a moderately bullish bias due to last week’s developments in the US Treasury market.

The previous week began with US long-term Treasury yields spiking to levels not seen in decades. The 30-year Treasury Note hit a 19-year high, and the 10-year Treasury Note also topped 4.24%, a high not seen in a long while. The sharp spike in bond yields caused an accelerated selloff in the US bond market, forcing the US Treasury Department to double its bond-buying program to $4 billion per operation to stabilize the market. The corresponding drop in bond yields reduced the appeal of the US Dollar and USD-denominated assets, weighing on the greenback vs. its peers.

The FX implication of doubling the bond-buying program is that the US Treasury is trying to set a floor under the bond market. This is creating an unusual dynamic:

Treasury buys long-term (10-yr and 30-yr) bonds → drop in long-term yields → Narrowing of US yield advantage → USD loses appeal → EUR/USD gains.

Simultaneously, geopolitical developments in the Middle East remain relevant to price action on USD pairs. Uncertainty around the Strait of Hormuz and the prospect of stiffer US sanctions against Iran keep geopolitical risks elevated. This means that oil prices will remain high, which brings on inflationary pressures. This is a risk-off event that generates some USD safe-haven appeal. This is the factor limiting the upside in the EUR/USD.

EUR/USD is therefore trading amid the interaction of US fiscal policy (Treasury-market intervention), geopolitics, and central bank expectations, which will come back under the spotlight at this week’s annual Jackson-Hole Symposium.

Macro Drivers for EUR/USD Forecasts 1) The Treasury Buyback Program

The US Treasury announced last Tuesday that it will double the maximum size of its long-end liquidity support operations from two billion dollars to at least four billion dollars per operational cycle. This bond buyback program will cover the 10- to 20-year and 20- to 30-year bond yields. The program is due to commence on 9th of September. However, this is not the same as quantitative easing by the US Federal Reserve. This distinction matters because Treasury buybacks primarily aim to boost liquidity by removing less-liquid bonds from the market. In other words, the Treasury is effectively redefining the maturity profile of US government debt and is not creating new money. The US Treasury documentation describing this new initiative explicitly calls them liquidity-support buybacks. For FX market traders, the policy is clear: It aims to contain long-term borrowing costs and reduce the US Dollar’s yield advantage, making USD and USD-dominated assets less appealing. The move has sent the US dollar lower, where it is now trading at multi-month lows versus the euro and many of its other G10 currency pairs. 

2) US Fiscal Concerns

Concerns about the US fiscal position are growing. The US Treasury’s intervention reflects these concerns. The surge in the 30-year Treasury yield above 5% indicates investors want higher premiums to buy and hold US government debt for longer. The sentiment is that investors increasingly see attempts to suppress long-term yields as artificial, which indicates that the US government is now uncomfortable with rising borrowing costs. The latter sentiment reduces fiscal credibility and ultimately scares investors away from US government bonds to other destinations. The decline in the US Dollar is evidence of this sentiment currently.

3) Geopolitical Risk Premium Still Generates USD Appeal

The US-Iran conflict is a risk-off event that still generates demand for the USD via safe-haven appeal. If there is severe geopolitical escalation beyond the current situation, safe-haven demand for the dollar will rise, curtailing EUR/USD upside. Furthermore, the Eurozone is an energy-import-dependent region. Higher oil prices will create imported Eurozone inflation, which could stifle Eurozone growth (a key ECB concern). The ECB is likely to turn dovish if Eurozone growth is suppressed.

EUR/USD Price Catalysts This Week 1) Jackson Hole and Fed expectations: This week’s annual Jackson-Hole Symposium is the most important catalyst for price action this week on monetary policy. The market will look for clues on the direction of Fed policy and how ECB policymakers handle the battle between imported inflation and growth.

2) Treasury yields: the intervention of the US Treasury in the bond market has made the direction of the 10-year and 30-year bond yields of prime importance. Typically, rising bond yields are USD-supportive, while falling bond yields are USD-negative, which favors a EUR/USD upside.

3) US-Iran developments and oil prices: A further deterioration in the conflict raises the geopolitical premium and introduces risk-off sentiment, which favors the USD via safe-haven appeal. However, US fiscal concerns and lower US bond yields will reduce USD demand and further weaken the USD. The energy shock also introduces Eurozone inflationary pressures and stifles growth prospects, limiting the Euro’s upside. View the geopolitical situation as fluid, as the dominant factor will determine which way the pair swings.

EUR/USD Technical Outlook The presence of the two pinbar candles at the 1.1671 resistance is indicative of a stall in the uptrend. If the price declines from this resistance, the 15 June high at 1.1621 becomes the immediate downside pivot. If this pivot fails to hold, 1.1577 (19 January and 21 May lows) forms the next downside target. Further below, the double bottom’s neckline at 1.1506 assumes importance.

Fig 1: EUR/USD daily chart showing key price levels (snapshot: 24 August 2026) On the flip side, if 1.1671 holds firm against downward pressure, we could see a bounce targeting 1.1813 resistance as the major upside target. Before then, there is the potential for a pit stop at 1.1743, which served as the 19 February support level.

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Euro (EUR) is softer against the Dollar (USD) after an almost 3% rally from late July, with price action turning defensive. German IFO data and rising political risks, including widening Bund–BTP spreads and French budget talks, are in focus. Technically, EUR/USD remains bullish, with resistance above 1.1700 and support around 1.1580/1.1600.

Euro soft after August surge"The EUR is soft and entering Monday’s NA session with a fractional 0.1% decline vs. the USD. Price action is somewhat defensive and notable in the aftermath of the EUR’s impressive near-3% rally from late July, opening up the possibility of a more meaningful reversal."

"Fundamental releases have been limited and this week’s highlight will be the German IFO business sentiment figures scheduled for Tuesday. Yield spreads have pulled back slightly, eroding some of the EUR’s support as US Treasury yields have climbed over the past week or so."

"Political risk appears to be rising as we note the renewed widening in intra-euro area government bond yields with a blowout in the bundBTP spread. Market participants are eyeing this week’s French budget negotiations as well as polls showing solid potential results for far right candidate Marine Le Pen."

"Bullish – the RSI is bullish and hovering around the overbought threshold at 70, pulling back slightly from last week’s peaks around 73."

"Recent price action has revealed clear near-term resistance above 1.1700 following a notable break above the 200 day MA (1.1631). We see limited additional resistance ahead of 1.1800 and see near-term support in the 1.1580/1.1600 area. "

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Euro/US Dollar (EUR/USD): Arc cycle analysis

Overview: Based on Arc Cycle Analysis applied to the 4h chart, Euro / U.S. Dollar is interacting with the 0.618 Resistance Arc within the current Arc Cycle. Bullish momentum has faded near this boundary, indicating that the upper Arc continues to cap upside expansion.

Metric

Reading

 Market Bias

Neutral-Bearish

 Preferred Scenario

Potential Rejection / Decline Toward Next Support Arc

 Primary Target Zone

1.1642

 Scenario Invalidation

Sustained close above 1.1692

 Current Arc Level

Resistance Arc (0.618)

 Cycle Status

Testing Resistance Arc

 Arc Integrity

Strong

Market outlookThe 0.618 Arc continues to act as a resistance boundary, capping upside expansion. Bullish attempts have stalled beneath the Resistance Arc, indicating that the resistance remains intact.

If the Resistance Arc holds firm, a decline toward 1.1642 price becomes the primary scenario. Conversely, a sustained 4h close above 1.1692 would invalidate the bearish scenario, opening the path toward the next Resistance Arc at the 0.786 Arc level.

EUR/USD has regained ground in recent sessions, with the pair trading near 1.17 as broad-based weakness in the US dollar continues to dominate the foreign-exchange market. The main driver remains the changing monetary-policy outlook, with investors focused on whether the Federal Reserve can maintain a restrictive stance while the US economy shows signs of slowing.

The dollar faces a key test this week as Fed Chair Kevin Warsh prepares to deliver his first speech at Jackson Hole on Friday. Persistent inflation and rising long-term Treasury yields could encourage a hawkish tone, particularly if Warsh signals that rate cuts in September are far from guaranteed. Conversely, weaker US growth or softer inflation data would reinforce expectations of easier monetary policy and could extend the dollar’s decline.

In Europe, euro-area inflation rose to 2.9% in July, keeping price pressures above the ECB’s 2% target. The ECB has kept interest rates unchanged since June, but higher energy prices and renewed inflation risks could limit the scope for further easing.

With EUR/USD trading near multi-month highs, the Jackson Hole symposium and upcoming US PCE inflation data could determine whether the euro can extend its advance or whether a hawkish Fed response triggers a renewed recovery in the dollar.

Technical Analysis of EUR/USD

As the daily EUR/USD chart shows, the pair has broken decisively above the descending trendline that had capped price action since the February highs, marking a significant shift in the medium-term structure.

The pair is now trading around 1.1665, comfortably above both the 100-period EMA at 1.1546 and the 0.382 Fibonacci retracement at 1.1579. The breakout has also lifted EUR/USD away from the 1.1537–1.1495 support area, leaving the 1.1714 Fibonacci resistance level as the next major test.

Bullish Scenario If buyers can maintain control above the 1.1579 Fibonacci level and the 100-period EMA, the bullish structure remains intact.

A break above 1.1714 would open the way towards the 1.1775–1.1800 resistance zone, where previous price action has repeatedly stalled. A sustained move above this area would strengthen the case for a broader recovery and suggest that the longer-term downtrend may have been decisively reversed.

Bearish Scenario Conversely, a rejection at 1.1714 followed by a break below 1.1579 would weaken the current setup and expose the 100-period EMA around 1.1546, which is closely aligned with the 0.5 Fibonacci level at 1.1537.

A deeper decline through this confluence would bring the 0.618 retracement at 1.1495 into focus, followed by 1.1435 and the 0.786 Fibonacci level as the next downside references.

With EUR/USD testing major Fibonacci resistance after breaking above its descending trendline, the key question is whether buyers can turn the breakout into a sustained advance towards 1.1800, or whether resistance will once again send the pair back towards its key support zone.

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Key highlightsEUR/USD started a major increase and climbed above 1.1620.A bullish trend line is forming with support near 1.1610 on the 4-hour chart.EUR/USD technical analysisLooking at the 4-hour chart, the pair settled above 1.1600, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair climbed above 1.1700 and traded as high as 1.1711 on TitanFX before it started a consolidation phase.

If there is a downside correction, the pair might find bids near 1.1635. The first major support could be near 1.1610 and the 50% Fib retracement level of the upward move from the 1.1511 swing low to the 1.1711 high.

There is also a bullish trend line forming with support at 1.1610. The next major support could be near 1.1560 and the 100 simple moving average (red, 4-hour).

The main support might be 1.1500 and the 200 simple moving average (green, 4-hour). A downside break and close below 1.1500 might send the pair toward 1.1420. Any more losses could open the door for a test of 1.1350.

On the upside, the pair is now facing a major hurdle at 1.1700. The next major resistance might be 1.1725. A close above 1.1725 could start another steady increase. In the stated case, the bulls could aim for a move to 1.1800. Any further gains might open the door for a test of 1.1880.

EUR/USD remains stronger for the fourth successive trading day, hovering around 1.1680 during the Asian hours on Monday. The currency pair holds its ground as the US Dollar (USD) struggles under pressure from newly announced United States (US) fiscal moves. The Treasury Department surprised financial markets by pledging to at least double its buybacks of longer-dated government debt in an attempt to rein in rising bond yields. Treasury Secretary Scott Bessent noted that buybacks could expand beyond $4 billion, a strategic effort aimed at signaling that elevated yields do not accurately align with underlying economic fundamentals.

Despite this pressure on the Greenback, further upside for EUR/USD may remain limited due to safe-haven demand supporting the US Dollar amid escalating geopolitical tensions in the Middle East. Tensions flared after Iranian Foreign Minister Abbas Araghchi dismissed upcoming US sanctions as an act of desperation that would fail to weaken Tehran. Adding to the friction, Iranian Security Chief Mohsen Rezaei warned of "earthquake-like" retaliation if US President Donald Trump takes further action, reinforcing risk-off sentiment in global markets.

On the European front, the Euro (EUR) is drawing baseline support from sticky inflation figures and persistent expectations of ECB monetary policy. Eurozone consumer inflation expectations over the next year ticked down slightly to 2.9% from 3% in June. However, because price growth remains well above the European Central Bank's 2% target, markets continue to price in the possibility of additional monetary tightening following June’s interest rate hike.

Analysts at Rabobank expect the ECB to move gradually toward a new framework for structural Longer-term Refinancing Operations as excess liquidity declines. They note that “the ECB could start discussions about the design of structural LTROs towards the end of this year, but the launch date depends on banks’ demand for reserves.” In their view, “12 months is a plausible maturity for these operations,” with the central bank likely favouring a more market-driven approach. Rabobank adds that “the ECB may issue the LTROs by auction, instead of the fixed-rate, full-allotment procedure,” aligning the new tool more closely with standard refinancing operations while still supporting reserve demand.

Euro FAQs The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.