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EUR/USD halts its three-day losing streak, trading around 1.1530 during the Asian hours on Thursday. The currency pair gains ground as the US Dollar (USD) faces challenges following the release of July's Consumer Price Index (CPI) report. Inflation in the United States moderated across a broad range of goods and services, which significantly cooled expectations for an aggressive Federal Reserve rate hike in September.

According to data released by the Bureau of Labor Statistics, the headline CPI increased 3.4% year-over-year in July, down from 3.5% previously. Similarly, core CPI, which excludes volatile food and energy costs, rose 2.5% year-over-year compared to 2.6% in June. Both readings matched market expectations.

US inflation in line with expectations as energy and food pressures easeAccording to TD Securities, July US consumer price inflation "matched expectations," with the headline CPI rising "0.1% m/m (0.074% before rounding; TD: 0.15%, consensus: 0.1%)." The strategists note that the modest increase was "partly explained by still retreating energy prices (gasoline -3% m/m) and slowing food inflation," underscoring the role of softer fuel and food costs in keeping overall price pressures contained.

In light of the new inflation data, market expectations for future Fed policy shifts have adjusted. According to the CME FedWatch tool, interest-rate swaps are now pricing in roughly a 40.1% chance of a rate hike in September. Odds for an October move fell to about 60% from 75% the previous day, with the next potential rate increase not fully priced in until December.

However, upside momentum for the risk-sensitive EUR/USD pair may remain constrained by escalating geopolitical tensions between the US and Iran. A senior Iranian official noted that Washington and Tehran remain at loggerheads over a permanent end to conflicts in the Gulf, reporting zero progress in reviving the interim deal or establishing an implementation timeline.

Meanwhile, the macroeconomic picture in the Eurozone continues to support the European Central Bank's (ECB) hawkish stance. Market-based inflation expectations for the Euro Area over the next year sit around 2.4%, remaining above the ECB’s official 2% target, while actual Eurozone inflation edged up to 2.9% in July. Coupled with a resilient economic outlook, highlighted by a 0.4% expansion in Q2, the strongest pace since early 2025, analysts have grown increasingly optimistic about the region's growth. Although near-term growth may moderate before regaining momentum, investors fully expect the ECB to deliver another 25-basis-point rate hike in September.

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.

EUR/USD price action turned volatile on Wednesday as the pair struggled to hold early gains following the latest US Consumer Price Index (CPI) report, a key driver for Federal Reserve interest rate expectations and US dollar direction. The euro briefly surged on signs of cooling US inflation but quickly lost momentum as traders reassessed the broader policy outlook.

The currency pair initially climbed as high as $1.1563 immediately after the inflation release before reversing lower, highlighting the market’s indecision. At the time of writing, EUR/USD is trading around $1.1525, with the closely watched $1.1500 psychological level once again coming into focus as a key short-term support zone.

While US inflation data showed further moderation, typically a bearish signal for the US dollar, the reaction was muted. The CPI figures largely met expectations rather than delivering a significant downside surprise, limiting the scope for a sustained dollar selloff and keeping EUR/USD trapped within a tight intraday range.

US CPI Falls to 3.4% as Fed Rate Hike Expectations Ease US consumer prices increased 0.1% month-on-month in July, following a 0.4% decline in June. On an annual basis, headline inflation eased to 3.4% from 3.5%. Core CPI, which excludes volatile food and energy prices, increased 0.2% during the month and slowed to 2.5% year-on-year.

Both readings were broadly consistent with market expectations. Nevertheless, the continued moderation in inflation strengthened the argument for the Federal Reserve to leave interest rates unchanged at its September meeting.

Interest-rate markets subsequently reduced the probability of a September rate increase to around 40%, compared with significantly higher expectations earlier this month. The combination of softer inflation and July’s weak employment report has made the case for an immediate rate increase considerably harder to justify. That should theoretically be negative for the US dollar and supportive of EUR/USD. Wednesday’s price action, however, shows that traders are not ready to abandon the greenback.

US Dollar Recovers as Oil and Middle East Risks Complicate Fed Outlook The US Dollar Index initially dropped to approximately 99.61 following the CPI release but subsequently recovered toward the psychologically important 100.00 level. One reason is that the inflation outlook remains vulnerable to developments in energy markets.

Oil prices have remained volatile amid continuing tensions in the Middle East and uncertainty surrounding shipping through the Strait of Hormuz. A sustained increase in crude prices could feed back into US inflation, complicating the Federal Reserve’s path even as underlying price pressures moderate. The geopolitical backdrop has also maintained some safe-haven demand for the dollar.

As a result, traders appear reluctant to price out additional Fed tightening entirely. While a September move now looks less likely, markets still see the possibility of another increase later in the year if inflation proves persistent. For EUR/USD, this has created a tug-of-war between improving rate differentials for the euro and lingering demand for the US dollar.

EUR/USD Price Forecast: $1.1500 Becomes Critical Support The one-hour EUR/USD chart shows a clear deterioration in short-term momentum following the rejection from the $1.1560 area. EUR/USD is currently trading around $1.1525, below the Bollinger Band 20-period moving average near $1.1536. The pair has also moved toward the lower Bollinger Band, currently around $1.1517, highlighting the increase in short-term selling pressure.

The MACD provides another warning for euro bulls. The MACD line has moved below its signal line and the histogram has turned increasingly negative, suggesting bearish momentum is building following Wednesday’s failed breakout.

The first level to watch is therefore $1.1500. This psychological level has repeatedly attracted buyers and remains important to the broader recovery structure. A decisive break below $1.1500 could strengthen the bearish correction and expose the $1.1465-$1.1470 area.

On the upside, EUR/USD first needs to reclaim $1.1535-$1.1540 to ease immediate selling pressure. Above there, the $1.1555-$1.1565 zone represents the more significant resistance area. A sustained break above $1.1565 would put $1.1600 back into focus.

EUR/USD Outlook: Can the Euro Hold Above $1.15? The near-term EUR/USD outlook remains finely balanced following the US CPI report. Cooling inflation and weaker US employment data have reduced the probability of a September Fed rate hike, removing an important source of support for the dollar. However, Wednesday’s reversal shows that softer CPI alone may not be sufficient to push EUR/USD decisively higher.

Attention now turns to upcoming US economic releases, including producer prices and retail sales. Stronger data, particularly another sign of persistent inflation, could revive Fed tightening expectations and put $1.1500 under renewed pressure.

Conversely, further evidence that inflation and economic activity are cooling could push Treasury yields and the dollar lower, giving EUR/USD another opportunity to challenge $1.1565 and potentially $1.1600. For now, $1.1500 is the key dividing line. Holding above it keeps the euro’s broader recovery intact, while a convincing breakdown would shift the short-term EUR/USD price forecast increasingly in favour of sellers.

Why is EUR/USD falling after the US CPI report?

EUR/USD initially rose after US inflation eased but reversed as the dollar recovered. The CPI figures were broadly in line with expectations, while elevated energy prices and geopolitical uncertainty continue to create upside inflation risks.

Will the Federal Reserve raise interest rates in September?

Expectations for a September Fed rate hike fell after July CPI showed headline inflation easing to 3.4% and core inflation declining to 2.5%. Markets currently favour the Fed keeping rates unchanged, although another increase later in 2026 remains possible if inflation pressures intensify.

What are the main EUR/USD resistance levels?

Immediate resistance sits around $1.1535-$1.1540, followed by the stronger $1.1555-$1.1565 area. A breakout could open the door toward $1.1600.

Key Points:EUR/USD pulled back as traders reacted to U.S. CPI report. USD/CAD failed to settle below the support level at 1.3920 - 1.3935.USD/JPY gained some ground as traders ignored the pullback in Treasury yields.

In this article:EUR/USD

-0.15%

EUR/USD ForecastGBP/USD

-0.09%

GBP/USD ForecastUSD/CAD

+0.13%

USD/CAD ForecastUSD/JPY

+0.07%

USD/JPY Forecast

U.S. Dollar Moves Higher As Inflation Rate Drops To 3.4%

DXY 120826 4h Chart U.S. Dollar Index gains some ground as traders focus on CPI report. The report indicated that Inflation Rate declined from 3.5% in June to 3.4% in July, in line with analyst estimates. Core Inflation Rate decreased from 2.6% to 2.5%. Core Inflation Rate has also met analyst expectations.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 99.85 – 100.00. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.

EUR/USD Retreats After U.S. CPI Report

EUR/USD 120826 4h Chart EUR/USD pulled back as traders focused on U.S. inflation data. Traders also monitored the dynamics of the oil markets. Oil prices were swinging between gains and losses amid geopolitical uncertainty and did not have a material impact on forex market dynamics.

The nearest support level for EUR/USD is located in the 1.1510 – 1.1525 range. in case EUR/USD declines below the 1.1510 level, it will head towards the next support at 1.1435 – 1.1450. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

GBP/USD Pulls Back From Weekly Highs GBP/USD 120826 4h Chart GBP/USD moved away from session highs as traders reacted to U.S. CPI report. It looks that some traders hoped that U.S. inflation numbers would be lower than analyst estimates.

In case GBP/USD manages to settle below the 1.3500 level, it will head towards the support level at 1.3465 – 1.3480. A move below the 1.3465 level will push GBP/USD towards the next support, which is located in the 1.3335 – 1.3350 range.

On the upside, GBP/USD needs to settle above the resistance at 1.3550 – 1.3565 to have a chance to gain upside momentum in the near term.

USD/CAD Rebounds From Multi-Week Lows USD/CAD 120826 4h Chart USD/CAD attempts to rebound despite rising precious metals markets. Gold settled above the $4400 level, while silver made an attempt to settle above $66.00. Other commodity-related currencies were mixed in today’s trading session.

If USD/CAD settles above the 1.3950 level, it will head towards the 50 MA at 1.3995. A move above the 50 MA will push USD/CAD towards the resistance level at 1.4010 – 1.4025.

On the support side, USD/CAD needs to settle back below the 1.3920 level to gain downside momentum in the near term. In this case, USD/CAD will head towards the support at 1.3825 – 1.3840.

USD/JPY Moves Back Towards The 159.50 Level USD/JPY 120826 4h Chart USD/JPY gains some ground despite the pullback in Treasury yields. The yield of 2-year Treasuries declined below the 4.19% level, while the yield of 10-year Treasuries settled below 4.68%.

The nearest resistance level for USD/JPY is located in the 159.50 – 160.00 range. A successful test of this level will open the way to the test of the next resistance at 161.50 – 162.00. It remains to be seen whether BoJ is ready to defend the Japanese yen in case USD/JPY attempts to settle above the 162.00 level.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

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Summary:

The in-line US CPI data leaves no new catalysts for gold and the EUR/USD, leaving the previous fundamental influences intact. Current Setup The latest US CPI report did not deliver a major surprise for financial markets, with both the headline and core inflation prints meeting expectations. The consensus forecasts for the July US CPI had been for headline CPI to come in at 3.4% YoY (prior 3.5%), while the core CPI was expected at 2.5% year-on-year (prior 2.6%).

The in-line report means that there is no material need to change the current Federal Reserve policy narrative. Fed policymaker Beth Hammack had indicated on Monday that raising rates once would do nothing for the US economy, adding that any benefits from a hawkish tilt has to come from multiple rate hikes. With the US CPI not doing much to alter expectations, investors now have to focus on next month’s employment and inflation data, as well as the upcoming business activity indicators.

For both gold and the EUR/USD, the in-line prints mean that there is no material catalyst to cause a decisive USD repricing.

Gold: CPI removes the immediate inflation shock

Gold is up by 1.52% on the day, maintaining the week’s trajectory pre-CPI. With no pressure on US bond yields, gold will keep trading within the context of the geopolitical de-escalation narrative as the greenback keeps reeling from last week’s dismal NFP data.  

Gold remains highly sensitive to:

US real yields Fed expectations US dollar direction Geopolitical risk Gold: Technical Outlook The bias on gold remains cautiously bullish. The CPI data leaves the yellow metal’s direction subject to US bond yields, geopolitics, and USD sentiment.

4452 remains the next upside target, and if this barrier is breached, a move towards the 4509 high of 4 June 2026 cannot be ruled out.

Fig 1: Gold chart (4-hr) showing key price levels post-CPI (snapshot: 12 August 2026) This upside move is only invalidated of the 4382 support is breached via profit-taking or a retracement. In this case, we will see support levels at 4314 (10 August low) and 4213 (22 June 2026 high) forming the next downside targets.

EUR/USD: no fresh catalyst after limited CPI surprise The pair traded around 1.15 just before the release of the CPI data, as traders sought for evidence that US inflation was cooling enough to warrant a more dovish Fed. The in-line result means there was no major catalyst either to the upside or downside, as there was nothing on which to make any changes to the Fed outlook.

US CPI → Fed expectations → Treasury yields → USD → EUR/USD

That leaves the EUR/USD more sensitive to the following drivers:

Treasury-yield direction Fed/ECB communication Eurozone economic data ECB expectations Broader US Dollar sentiment The bias for EUR/USD remains constructive on the back of dollar weakness from last week’s dismal NFP, as well as a lack of safe-haven appeal as the Middle East geopolitical situation remains in de-escalation.

If the core inflation print came in much higher than expected, the markets would have repriced Fed expectations towards a more restrictive, hawkish end of the spectrum. This would have been deemed USD-positive.

But this was not the case.

Consequently, the Euro remains on course to consolidate its recent gains versus the greenback. But the lack of a downside surprise also means that the Euro would have to look elsewhere for a bullish catalyst. In the near term, the most likely source would be geopolitics and US bond yields.

EUR/USD Technical Outlook The ascending trendline remains the dynamic support for recent price action. A bounce from here will have to test and break past the 1.1577 (7 August high) and 1.1621 (15 June high) resistance levels to continue the uptrend towards the 1.1671 resistance formed by the 29 May 2026 high.

Fig 2: EUR/USD (4-hr chart) showing key price levels post-CPI (snapshot: 12 August 2026) On the flip side, a breakdown of the trendline makes the 1.1506 support (8 June/11 June lows) available as the next downside target. If this barrier is breached, the next downside target lies at 1.1462 the 3/14 July highs).

At the time of writing, the EUR/USD was struggling to find a clear direction. Hardly a surprise, truth be told, ahead of such an important data release. Investors are weighing a renewed surge in crude oil prices in recent days against the prospect of another important US inflation reading. While market volatility remains subdued, the combination of higher energy prices and elevated bond yields is becoming increasingly difficult to ignore. For the EUR/USD forecast to improve, energy prices will need to fall and rapidly so. This looks unlikely. The upcoming CPI report could provide some short term volatility, but it remains to be seen how much of a change there will be in the September rate cut odds, currently a coin toss.

Crude oil drives sentiment Looking at equity markets, investors remain remarkably unmoved by recent gains in oil. For me, the concern is that oil prices could continue rising if there is no meaningful progress between the US and Iran. That could reignite stagflation concerns and lead to unwanted policy tightening. The Strait of Hormuz remains effectively closed. And the longer it remains closed the higher oil prices are likely to go. While reports of progress in discussions involving Oman and Iran have been welcomed, Iran has also indicated that the strait will remain shut until its conditions are met by the US.

For the EUR/USD forecast, this is a tricky backdrop. The eurozone is heavily dependent on imported energy, meaning a sustained rise in oil and gas prices could worsen the region’s inflation outlook while weighing on economic growth. That creates a potential headwind for the euro.

Meanwhile, US crude inventories provide another reason for caution. Stockpiles have fallen to their lowest level in more than four decades, adding to concerns that supply shortages could amplify the impact of the geopolitical disruption. We will have some fresh inventories data due later today. Let’s see if there any more drawdowns.

CPI likely to move the dollar only temporarily US CPI remains the main scheduled event for markets today. The previous report surprised significantly to the downside, with headline inflation slowing to 3.5% from 4.2%.

Economists are expecting a more modest improvement this time. Headline CPI is forecast to rise 0.1% month-on-month, leaving annual inflation at 3.4%, while core CPI is expected to increase 0.2%, keeping the annual rate at 2.5%, down from 2.6% previously.

A softer-than-expected reading could reinforce expectations for a less hawkish Fed and put renewed pressure on the dollar. But if the inflation data is in line or stronger than expected, then the dollar can remain supported.

The dollar’s reaction to CPI may fade fast in any event, especially if the data does not deviate too much from expectations. A lot will depend on what happens to oil prices. If crude continues climbing, markets may start rebuilding expectations for tighter US monetary policy, even if the inflation data itself is relatively benign.

Bond yields are flashing a warning The other part of the equation is the bond market. Treasury yields have remained elevated as oil prices have risen, reflecting concerns that the energy shock could eventually feed into broader inflation.

So far, equity investors appear largely unconcerned. But if crude moves substantially higher from here, the combination of rising inflation expectations and higher yields could become increasingly uncomfortable for risk assets.

That would also create an additional headwind for the euro, particularly given the relatively lower interest-rate environment in the eurozone and the region’s exposure to imported energy.

EUR/USD levels to watch At the time of writing, the EUR/USD was trading just below 1.1550. The directional picture still looks uncertain. Volatility has remained remarkably low, partly reflecting the summer trading environment and partly the market’s wait-and-see approach ahead of CPI.

Source: TradingView.com Technically, the pair recently broke above a bearish trend line, but buyers have so far failed to generate meaningful follow-through. That is a sign of weakness.

Resistance begins around 1.1575, with the recent high at 1.1622 also important. The 200-day moving average is converging around that area, making a break above it a potentially significant bullish signal to watch out for in the coming days.

On the downside, initial support is located around 1.1500–1.1520. A break below that zone would expose 1.1470 and then 1.1410, with the recent lows around 1.1350 becoming the next major downside reference.

EUR/USD forecast summary For now, EUR/USD remains caught between a potentially softer US inflation backdrop and an increasingly uncomfortable energy story.

If CPI comes in cooler and oil prices stabilise, the euro could regain momentum. But if crude continues higher, bond yields follow, and US inflation proves sticky, the risks could quickly turn more negative.

Another key question is whether the EUR/USD can continue looking through higher energy prices — or whether the bond market eventually forces investors to reassess the risks they have so far largely ignored. All told, the EUR/USD forecast remains tilted slightly lower.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

Chris Turner at ING notes EUR/USD remains lacklustre despite better Eurozone data and upside surprises, as high European natural gas prices and Gulf tensions weigh on the Euro. He argues that a soft US CPI print could allow EUR/USD to challenge last week’s 1.1580 high, though further gains may be limited by upcoming data and the Jackson Hole symposium before the Fed’s mid-September decision.

Energy costs cap Euro upside"EUR/USD continues to trade in a lacklustre fashion. Better hard activity data and eurozone economic numbers generally surprising on the upside have failed to provide the euro with much of a lift. That may be owed to unresolved tension in the Gulf, which is keeping European natural gas prices above €60/MWh."

"In terms of geopolitics, there is very little clarity here, although the latest reports suggest Pakistan and Oman are managing to bring the US and Iran a little closer together."

"If the US CPI number does indeed come in on the soft side, EUR/USD should be able to challenge last week's high at 1.1580. That is about the extent of a move priced into one-day straddle options."

"Much more of a move may be too much to ask in quiet summer markets, given we will also see another round of CPI and jobs data – plus the Jackson Hole Fed symposium – before the Fed decides on policy mid-September."

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

The euro and pound are holding their ground against the US dollar, although the momentum in European currencies has become more subdued following their previous gains. Market participants are reluctant to establish new positions ahead of the release of the July US inflation report, which could alter expectations for the Federal Reserve’s future policy. Recent labour market data is also encouraging caution: a weak ADP report and a decline in the ISM employment component have added to signs of a gradual cooling in the US labour market.

Today, the main focus will be on the US Consumer Price Index (CPI). According to forecasts, annual inflation may slow to 3.4% from 3.5%, while monthly prices are expected to rise by 0.1% after falling 0.4% a month earlier. Core CPI is forecast at 2.5% year-on-year and 0.2% month-on-month. Weaker-than-expected figures could strengthen expectations of monetary policy easing by the Fed and put additional pressure on the dollar. If inflation comes in above forecasts or proves more persistent, the US currency could receive fresh support. Final inflation figures for Germany and Italy will also be released in Europe, although their impact is likely to remain limited in the absence of significant deviations from preliminary estimates. Therefore, US inflation data is likely to be the main driver for EUR/USD and GBP/USD during today’s session.

EUR/USD In recent trading sessions, EUR/USD has been moving within a relatively narrow range of 1.1500–1.1580. Technical analysis suggests the possibility of another test of the lower boundary, as a Dark Cloud Cover pattern has formed on the daily timeframe. If sellers manage to establish a position below 1.1500, the pair could resume its downward move towards 1.1430–1.1460. Conversely, weaker-than-expected US inflation data could push the price towards 1.1600–1.1620.

Key events for EUR/USD:

today at 09:00 (GMT+3): German Consumer Price Index (CPI); today at 11:00 (GMT+3): Italian Harmonised Index of Consumer Prices (HICP); today at 15:30 (GMT+3): US Consumer Price Index (CPI).

GBP/USD GBP/USD buyers managed to push the pair to a new local high around 1.3500. Technical analysis indicates the possibility of further gains towards 1.3540–1.3560 if the 1.3480–1.3500 area is established as support. Stronger-than-expected US inflation data could support the dollar and trigger another test of the 1.3400 level in GBP/USD.

Key events for GBP/USD:

tomorrow at 09:00 (GMT+3): UK GDP; tomorrow at 14:00 (GMT+3): NI’s monthly GDP tracker; tomorrow at 21:00 (GMT+3): US federal budget execution report.

Overall, EUR/USD and GBP/USD are holding their ground after their previous gains, but their next direction will largely depend on today’s US inflation report. Weaker CPI data could strengthen expectations of Fed easing and put additional pressure on the dollar, creating room for further gains in European currencies. If inflation comes in above forecasts, however, the US currency could receive fresh support, increasing the likelihood of EUR/USD and GBP/USD returning to their nearest support levels.

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US inflation surprises remain subdued versus history Fed rate hike pricing has eased through August EUR/USD grinds higher within ascending channel USD/JPY coils beneath 159.37 resistance For all the talk about today’s US inflation report, it is debatable whether anyone truly has a consistent edge in predicting how the data will print, let alone how markets will respond over a longer time frame. Looking at price action across major currency pairs heading into the release and identifying the technical levels that matter provides a framework as good as any for anticipating or reacting once it comes out.

No Repeat of 2022 Relative to the supply shock-driven inflation surge coming out of the pandemic and Ukraine war, the inflationary impact from the latest bout of energy price strength has so far been far less significant. Despite disruptions to energy supplies coming out of the Gulf, Citi’s US Inflation Surprise Index shows that, over recent years, inflation prints have by and large either met or undershot expectations.

The index measures whether inflation data is coming in above, in line with, or below market expectations, with readings above zero signalling upside surprises and readings below zero indicating downside surprises.

Source: LSEG, FOREX.com

Of course, that trend does not eliminate the risk of an upside surprise today. But it does suggest the recent skew has been towards inflation meeting or undershooting expectations rather than exceeding them.

Based on forecasts compiled by the Wall Street Journal, monthly estimates for headline CPI range from 0% to 0.16%, centred around a median of 0.12%. For core, the range is 0.16% to 0.26%, with the median at 0.22%. That leaves the hurdle for an upside surprise relatively low.

Importantly, it will not just be the headline figures that matter. Traders will be looking for evidence that inflationary pressures are becoming more entrenched in core services excluding housing, which would provide a read on domestically generated price pressures and labour market conditions. Core goods prices will also be important in assessing whether tariff pass-through is largely complete.

Those components will help shape expectations for the PCE inflation report later this month, with PPI due Thursday providing another piece of the puzzle.

Fed Hike Bets Retreat

Source: TradingView

Despite the re-emergence of energy-led inflationary pressures, market pricing for Fed rate hikes out to the June meeting next year has been edging lower in August. According to Fed funds futures, around 44 basis points of tightening is priced over this period, with the September meeting effectively deemed a coin flip.

Back in late July, around 62 basis points of hikes were priced over the same period. But a run of relatively tepid US economic data, following a series of strong beats earlier this year, including an underwhelming payrolls report last Friday, has curtailed hawkish pricing.

Euro Retains Its Bid

Source: TradingView

Looking at EUR/USD, we have seen a series of bullish breakouts over recent weeks. The first came from a minor downtrend in the wake of the Fed meeting two weeks ago. Then came the joint intervention by the US Treasury and Japan’s Ministry of Finance, which saw the pair bounce strongly from beneath former resistance around 1.1480, where the 50-day simple moving average was also located.

Since then, the price has settled into a grind within an ascending channel, breaking above downtrend resistance in place from the highs set earlier this year. That slowdown in the bullish move has coincided with renewed energy price strength, with the Gulf effectively shut as geopolitical tensions between Iran and the United States escalate again. Even so, it has not been enough to derail the euro yet.

The pair continues to attract bids within the ascending channel that formed from the 23.6% Fibonacci retracement of the January to June bear move, leaving the near-term options clear cut.

While the structure holds, longs can be considered on dips towards the lower end of the channel, targeting a retest of the 100-day simple moving average, which capped the pair late last week, followed by the upper end of the structure. Beyond that, the 38.2% Fibonacci retracement at 1.1614 comes into view, with the 200-day simple moving average at 1.1627 not far above and now flatlining.

On the downside, a break of the lower end of the ascending channel would bring the 23.6% Fib back into focus. Beneath that, 1.1480 is the next level of note, having previously acted as resistance, followed by the 50-day simple moving average.

Longs are marginally favoured over shorts, with the oscillators still siding with bulls even though upside momentum is no longer strengthening. RSI 14 remains above the neutral 50 level at around 60, while MACD has staged a bullish crossover and moved into positive territory, although it too is flattening out.

While upside momentum is no longer building, the broader technical picture suggests retaining a modest bullish bias may be more advantageous than turning bearish.

Yen Weakness Refuses to Fade

Source: TradingView

As correctly flagged in my weekend USD/JPY note, upside risk in the pair has played out so far this week. Importantly, that has occurred despite both the soft US payrolls report and a further pullback in Fed hike pricing, reinforcing the point that yen weakness is broader and more structural than simply a US rates story.

Following the push above last week’s high, USD/JPY finds itself coiling in what resembles an ascending triangle on the four-hourly chart on the left. Gains have been capped around 159.37, while dips continue to be bought at progressively higher levels. The structure has not been in place for an extended period, but it still warns of the potential for an eventual topside break and continuation of the rebound seen so far in August.

On the upside, the first levels of note are the 100-day simple moving average on the daily chart on the right, followed by 160.73, the former record high hit in late April. That level has flipped between support and resistance on subsequent tests, leaving it as an obvious reference point if the rebound extends.

On the downside, the gradually rising trendline visible on the four-hourly chart runs from the Liberation Day lows in April last year. Even though it was broken convincingly during the latest intervention episode, the price respected it earlier this week, suggesting it remains relevant. It kicks in today around 159.00.

Beneath that, 158.58, last week’s high, is the next level of note, followed by 157.95, which has acted as both support and resistance since the intervention episode.

The oscillators are mildly bullish, even though upside momentum is no longer building. RSI 14 is flatlining above the neutral 50 level at around 61, while MACD staged a bullish crossover earlier this month and has since moved into positive territory, although it is now converging back towards the signal line. Overall, the setup still favours retaining a bullish bias on the four-hourly timeframe.

Crude oil and bond markets are flashing warning signs for risk assets. Yet, investors seem remarkably relaxed. However, if the current situation doesn’t improve markedly, we could see stock markets stage a bit of a correction and in the FX space risk-sensitive currency pairs could take a dip. With that in mind, the risks to the near-term EUR/USD outlook remain titled to the downside. With CPI still a day away, all the focus is on crude oil and US-Iran headlines.

Crude oil remains the key risk for EUR/USD outlook Crude oil prices have surged in the last few days because the Strait of Hormuz remains effectively shut, and there are no signs of progress between the US and Iran.

Oil prices have been rising sharply in the last few days. Today, they were up more than 2% earlier, with Brent briefly reaching around $89 dollars a barrel, before giving back some of those gains.

Source: TradingView.com The latest headlines around talks between Oman and Iran provided some relief, but we shouldn’t confuse talks with an actual breakthrough. Indeed, Iran has come out saying that the Strait of Hormuz will remain shut until their conditions are met.

But current standings from both the US and Iran suggests any potential deal is still some way off, meaning risks remain skewed to the upside for oil prices and to the downside for EUR/USD.

Concerns about supply shortages are also evidenced in oil inventories data in the US, where crude stockpiles are now at their lowest level in more than four decades.

If oil (and gas) prices continue to push higher, this will be bad news for energy importing regions like the eurozone, making the EUR/USD outlook somewhat bearish.

Don’t forget about the bond markets On top of the US-Iran situation, the prospect of the Fed keeping rates high — or even tightening policy in September — is still on the table. Yet equity markets, including the German DAX index, have barely flinched. The DAX hit a new all-time high earlier today, before coming off its highs a few moments ago.  So, is the market underestimating the risks?

There is also the persistent warning sign in the bond market. Yields, which have been rising alongside oil prices, during the US-Iran war, have remained consistently high across the curve.

If crude continues higher, investors could start worrying about another inflationary shock. That could push yields even higher, putting pressure on bond prices, and ultimately make equities much less attractive - especially growth stocks. That could also be bad news for foreign currencies, especially those where interest rates are already lower compared to the US, or those where the economy relies on energy imports – such as the euro.

Technical EUR/USD outlook and key levels to watch The EUR/USD was holding around 1.1550 handle at the time of writing, but the directional bias is far from clear. Volatility in this pair has been shocking low for a while now. It is not just because of the summer months, although clearly this is also contributing to subdued trading activity.

Source: TradingView.com The pair broke its bearish trend line a few days ago, yet there has been little desire to bid up the exchange rate meaningfully from here by the bulls. That’s understandable because we have the all-important inflation data coming up and not to mention the ongoing oil market uncertainty.

Perhaps it makes sense to trade this EUR/USD from one level to the next and moving on to the next opportunity in these circumstances.

Key short term resistance is between 1.1575 to 1.6000 area. The most recent high comes in at 1.1622, where we also have the 200-day average converging. A break above that zone would thus be a bullish technical development.

Support meanwhile is seen around 1.1500-1.1520 area. Below this 1.1470ish and 1.1410 are the next downside targets, followed by the recent lows near 1.1350.

In summary So, the EUR/USD outlook looks far from certain. For now, it is in a holding pattern ahead of US CPI. But if oil prices keep rising and bond yields continue climbing, the downside risks could become more pronounced - especially if US CPI also turns out to be hotter than expected.

In the slightly longer term outlook, the big question is whether the EUR/USD can continue looking through higher oil prices — or whether bonds eventually trigger the correction investors have been largely ignoring.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

Commerzbank's Chief Economist Dr. Jörg Krämer expects EUR/USD to recover once the Iran conflict eases and to grind higher over the coming quarters. Krämer links Euro strength to eroding Federal Reserve independence, falling US rate expectations and a significantly overvalued Dollar on purchasing power parity. Commerzbank's updated forecast sees EUR/USD at 1.18 by mid‑2027 and 1.19 by end‑2027.

Dollar seen weakening on Fed doubts"The EUR/USD exchange rate should rise again after the war ends and continue to drift higher in the following quarters due to the eroding independence of the U.S. Federal Reserve, especially since the dollar is significantly overvalued in terms of purchasing power parity."

"We expect the EUR/USD rate to be 1.18 by mid-2027 (previously 1.20)."

"We expect US interest rate expectations to correct even further downward in the coming months, weighing on the dollar."

"On the one hand, inflation risks are likely to diminish with the reopening of the Strait of Hormuz, which we expect to occur by the end of the year."

"All in all, we expect a gradual rise in EUR/USD toward 1.19 by the end of 2027 (previous forecast: 1.21)."

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

Chris Turner at ING observes that EUR/USD realised volatility continues to decline, with one-year volatility matching lows from November 2024. He argues this calm backdrop is unlikely to change before mid-September, and warns that underhedged European investors in US assets may need to raise Dollar hedge ratios if the Dollar weakens. EUR/USD is expected to stay within 1.1515-1.1560 today.

Calm trading and hedge ratio risks"EUR/USD realised volatility continues to sink and one-year is now at 5.8% – matching the low from November 2024. As above, it is hard to see that environment changing anytime soon – or at least until mid-September when central bankers around the world return from their summer breaks."

"We published an article yesterday looking at the dollar hedge ratios of European investors. The risk here is that European investors in the US are once again underhedged and have to quickly raise their dollar hedge ratios should the dollar look vulnerable again."

"It is hard to see EUR/USD trading much outside a 1.1515-1.1560 range today."

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

Key Points:U.S. CPI is the primary FX catalyst as traders assess whether inflation will alter expectations for the Fed's September decision.UK second-quarter GDP is another important catalyst for GBP/USD and expectations surrounding Bank of England policy.DXY remains technically vulnerable below its key moving averages while defending rising trendline support near 99.42.EUR/USD is testing long-term resistance near 1.1556, with a breakout potentially strengthening its bullish structure.GBP/USD remains constructive above its rising trendline and moving averages while buyers challenge 1.3516 resistance.

US Dollar News: CPI Test Puts Fed and FX Policy in Focus As we enter August 11, attentions are on the anticipated July CPI data to be released on Wednesday. The result of this CPI data will ultimately decide if the Fed continues its pause on rate increases or if it resumes tightening in September. Economists expect a 0.2% month-on-month increase in the core CPI. Pocket appreciations, consistent with that forecast, would likely reflect inflation returning to the Fed’s 2% target. In June, the Fed’s preferred core inflation measure was reported at 3.3% with an increase from the previous year at 2.8%.

Prior expectations around interest rates have become unpredictable as the persistent inflation and regional energy shocks challenge Chair Warsh’s decision to keep rates the same in the last meeting, despite the three dissents for a rate increase. Additionally, President Trump’s Larry-Kudlow-like policies to undermine the Fed’s deliberations and autonomy by targeting a Fed Governor have added to the already increasing fundamental risks of the dollar.

There are also many uncertainties for the euro. Recent news out of Washington indicate that the yen was propped up by the recent dollar selling done by the U.S. Treasury. This has also sparked questions around currency coordination and if the U.S. Treasury was working to support the dollar while avoiding pressure on the bond market. For the ECB, that equates to staying the course for now following their last policy meeting in July.

Sterling is focusing on this week’s second-quarter UK GDP data. Most economists say the economy grew by around 0.4% in Q2. This would follow Q1’s 0.6% growth. Despite the challenges of the Iran situation and supply chain issues, activity remained resilient. The data will matter for the Bank of England as stronger data means the bank can keep an eye on inflation risks. The data will also affect the U.S. dollar, euro, and pound. Weaker figures would mean the BoE would do more to fight inflation. For now, U.S. CPI is the most important data for the currency markets. PPI and retail sales data are also important this week.

U.S. Dollar Index Technical Analysis: DXY Holds Rising Trendline but Remains Below Key EMAs Dollar Index Price Chart – Source: Tradingview The US Dollar Index currently trades at $99.88. The index is currently trading slightly above the rising trendline and a key horizontal support at $99.42. Although the index trades above the rising trendline and horizontal support, the index is currently trading below the 50-day EMA ($100.32) and the 100-day EMA ($99.91) and therefore bears still control the index. Buying pressure is apparent from the most recent candles defending the rising trendline. This, however, is not enough to be considered a bullish trend, and is currently lacking confirmation.

The RSI is currently at 41, which indicates that the selling pressure has diminished, however the RSI is still below the neutral mark at 50. Resistance for the index is expected at $100.36, $100.82, and $101.62. In the event the index falls, support is expected at $99.42. Below $99.42 is expected support at $98.76 and $98.18.

GBP/USD Technical Analysis: Sterling Tests Rising Trendline Near $1.3500 GBP/USD Price Chart – Source: Tradingview GBP/USD is trading around $1.3499, and is still trading above the rising trendline which supported the recovery since late July. The price is also still above the 50-period EMA at $1.3456 and the 100-period EMA at $1.3427, and although the price has been consolidating, the structure is still Bullish. Smaller bodies around the $1.3500 area suggest hesitation.

They are not large enough to indicate a reversal. The RSI is at 58, suggesting there is bullish momentum, which is healthy, but still not overbought. The areas of resistance for this momentum are $1.3516, $1.3559 and $1.3601. Moving in the other direction, support for this momentum is $1.3437, $1.3401 and $1.3343. In my opinion, if the GBP/USD is able to trade above the rising trendline, the Bullish setup is intact. I also believe that a break above $1.3516 could extend the move toward $1.3559.

EUR/USD Technical Analysis: Euro Stalls Below Long-Term Trendline at $1.1556

EUR/USD Price Chart – Source: Tradingview EUR/USD currently stands at $1.1534. Price activity shows the Euro trading along the long term falling trendline from where multiple attempts to move higher have been capped. The 50 day moving average (MA) stands at $1.1496, while the 100 day MA stands at $1.1542, and the EUR/USD is positioned below the 50 day MA indicating recent resistance.

Recent price movement has shown that the buyers could be losing steam after the strong bounce from $1.1357, and resistance has been built at $1.1556. The RSI (relative strength index) has an open bullish setup at 58, although a clean break above is what is called for.

In the short term, $1.1556 is the first resistance level, followed by $1.1674 and then $1.1790. In the short term, $1.1455 is the first major support level with the next support level standing firmly at $1.135

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United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note EUR/USD has stalled after last week’s surge, with flat momentum pointing to a 1.1530–1.1560 intraday range. For the next 1–3 weeks, the Euro’s upside hurdle has risen, requiring a close above 1.1580 to target 1.1600 and beyond, while strong support has shifted up to 1.1515.

Euro consolidates below 1.1580 barrier"24-HOUR VIEW: Having surged to a high of 1.1580 last Friday, EUR traded in a relatively quiet manner between 1.1539 and 1.1569 yesterday. EUR closed slightly lower by 0.14% at 1.1542. Momentum indicators are mostly flat, and today, we expect EUR to trade in a range, most likely between 1.1530 and 1.1560."

"1-3 WEEKS VIEW: The following is from our latest update from last Friday: “Our most recent narrative was from Monday (03 Aug, spot at 1.1530), when we indicated that “there is a chance for EUR to test the significant resistance at 1.1565.” We added that “should EUR close above this level, it could rise toward 1.1600.” Over the past few days, EUR tested 1.1560 thrice but failed to break above. Upward momentum is starting to slow, and a break below 1.1495 (‘strong support’ level) would mean that EUR has likely entered a range-trading phase.” EUR subsequently popped to a high of 1.1580 before closing at 1.1558. There has been no significant increase in upward momentum, and the hurdle for further gains has risen, with EUR needing to close above 1.1580 before a move to 1.1600 and beyond can be expected. The ‘strong support’ level is now at 1.1515 instead of 1.1495."

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

Key Points:EUR/USD settled near the 1.1550 level as traders focused on the strong rally in the oil markets. USD/CAD pulled back as precious metals markets moved higher. USD/JPY climbed towards the 159.00 level amid rising Treasury yields.

U.S. Dollar Rebounds As Oil Markets Rally

DXY 100826 4h Chart U.S. Dollar Index gains some ground as traders focus on the strong rally in the oil markets. Oil prices are up by +5% as U.S. and Iran did not reach any deal over the weekend. President Trump signaled that he would use economic pressure to force Iran back to negotiations.

High oil prices may push inflation towards higher levels and force the Fed to raise rates at the next meeting in September, which will be bullish for the American currency.

The nearest resistance level for U.S. Dollar Index is located in the 99.85 – 100.00 range. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.

EUR/USD Moves Away From Multi-Week Highs EUR/USD 100826 4h Chart EUR/USD moved lower as traders took some profits off the table near multi-week highs. There are no important economic reports scheduled to be released in the EU today, so traders will stay focused on general market sentiment.

The nearest support level for EUR/USD is located in the 1.1510 – 1.1525 range. If EUR/USD declines below the 1.1510 level, it will head towards the next support at 1.1435 – 1.1450. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

GBP/USD Tests New Highs GBP/USD 100826 4h Chart GBP/USD climbed above the 1.3500 level as traders ignored rising oil prices and bet on dovish Fed.

In case GBP/USD stays above 1.3500, it will head towards the nearest resistance level at 1.3550 – 1.3565. A move above the 1.3565 level will push GBP/USD towards the 1.3650 level.

On the support side, a move below the support at 1.3465 – 1.3480 will open the way to the test of the 50 MA at 1.3444. If GBP/USD manages to settle below the 50 MA, it will head towards the next support level at 1.3335 – 1.3350.

USD/CAD Attempts To Settle Below The Support At 1.3920 – 1.3935

USD/CAD 100826 4h Chart USD/CAD pulls back as traders focus on rising precious metals markets. Gold climbed above the $4350 level, while silver settled above $65.00. Other commodity-related currencies are mostly flat in today’s trading session.

Currently, USD/CAD is trying to settle below the support at 1.3920 – 1.3935. If USD/CAD manages to settle below the 1.3920 level, it will head towards the next support level, which is located in the 1.3825 – 1.3840 range.

USD/JPY Moves Higher As Treasury Yields Rise USD/JPY 100826 4h Chart USD/JPY gains ground as the yen continues to lose ground after interventions. Rising Treasury yields provide additional support to USD/JPY. The yield of 2-year Treasuries climbed above the 4.23% level, while the yield of 10-year Treasuries settled near 4.70%.

At this point, forex traders are not worried that BoJ would intervene again to support the yen. Fundamentally, the yen remains weak due to the difference in interest rates in U.S. and Japan.

If USD/JPY settles above the 50 MA at 158.84, it will head towards the resistance level at 159.50 – 160.00. A move above the 160.00 level will push USD/JPY towards the 162.00 level.

If you’d like to know more about how to trade forex, please visit our educational area.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

EURUSD probed again through strong barriers at 1.1560/66 (100DMA / daily cloud top) on Monday, following Friday’s false break higher, but continues to face headwinds at this zone.

The single currency benefited from weak NFP data that further deflated dollar on Friday, pressured by fading expectations for Fed rate hike in September, but so far lacks strength for final break.

Near-term structure remains firm as bullishly aligned daily studies continue to underpin the action, with extended consolidation (1.1515/1.1560) likely to precede fresh push higher.

Markets await release of US July CPI data (Wednesday) to add fresh details in near-term policy outlook, with Euro expected to benefit from weaker inflation.

Sustained break of 100DMA / cloud top to generate fresh bullish signal for attack at nearby Fibo barrier at 1.1586 (50% retracement of 1.1849/1.1324) which guards next target at 1.1626 (200DMA).

Extended dips should be ideally contained above broken Fibo 38.2% resistance (1.1524) to keep bulls in play.

Caution on break of 1.1500 support zone (broken bull-channel upper boundary / round-figure) that would signal deeper pullback.

Res: 1.1566; 1.1586; 1.1626; 1.1649
Sup: 1.1524; 1.1500; 1.1484; 1.1460

Windsor Brokers Ltdhttp://www.windsorbrokers.com/

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

ING’s Francesco Pesole notes that with key Eurozone data behind and European Central Bank (ECB) communication subdued, EUR/USD is now driven mainly by the United States (US) side. A softer US Consumer Price Index (CPI) could trigger a break above 1.1600, with the 200-day moving average at 1.1630 as the next resistance, while short-term rate differentials remain the dominant driver.

US side dominates Euro dynamics"The euro is entering a particularly quiet stretch for domestic drivers. The key July data releases are behind us, while August is typically a quiet month for European Central Bank communication. In any case, the ECB has already given markets a quasi-commitment to a September hike."

"That leaves EUR/USD firmly dominated by the USD side of the equation. A softer US CPI print would increase the chances of a break above 1.1600 already this week. The next important resistance beyond that is the 200-day moving average at 1.1630."

"Our short-term fair value models are offering little direction at present, with EUR/USD broadly tracking moves in rates, equities and commodities. Short-term rate differentials have continued to grow as the main driver for EUR/USD, meaning sensitivity to the Fed story should remain very elevated."

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

The Euro (EUR) trades slightly lower at around 1.1550 against the US Dollar (USD) during the European trading session on Monday. The EUR/USD pair edges down as the US Dollar holds onto its early recovery, which, according to market experts, lacks conviction, as traders have dialed down hawkish Federal Reserve (Fed) bets after the United States (US) Nonfarm Payrolls (NFP) data release.

Fed hike case softens as US jobs data underwhelmAnalysts at Rabobank argue that Friday’s US employment report has further eroded the case for additional Fed tightening, noting that “the case for a Fed hike is weakening, but it is certainly not yet done for.” They highlight that the “headline payrolls number disappointed, with a -23,000 jobs print and a 37,000 downward revision to the June estimate,” underscoring a softer tone in the labour market. Rabobank adds that their US strategist had already observed that “employment growth has been slowing for several months,” and that the latest release “confirmed that downside risks to the labour market have not disappeared entirely since the three insurance cuts last year.” In their view, this evolving backdrop “could strengthen the argument of the Fed’s doves,” even if the policy debate remains open.

This week, the major trigger for the US Dollar will be the US Consumer Price Index (CPI) data for July, which will be released on Wednesday.

On the Eurozone front, the Sentix Investor Confidence data, a key indicator of Investor morale, has come in surprisingly positive at 0.9 in August from -3.1 in July.

EUR/USD Technical Analysis

EUR/USD trades around 1.1550, holding significantly above the 20-day exponential moving average (EMA) at 1.1484 and slightly above the downward-sloping trend line around 1.1520, keeping the near-term bias bullish.

The Relative Strength Index (14) around 61 suggests constructive upside momentum, though still shy of overbought conditions, hinting that bulls retain control as long as spot remains anchored above the former trend-line cap.

On the downside, immediate support is seen at the trend-line break area near 1.1520, with the 20-day EMA at 1.1484 providing a deeper cushion if a pullback extends. Looking up, the pair could extend the advance towards the June 5 high at 1.1644 if it manages to hold above the August 7 high at 1.1581.

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

US Dollar FAQs The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

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Danske Research Team notes that the US Dollar (USD) weakened after a softer US jobs report, allowing EUR/USD to briefly reach its highest level in almost two months. They highlight that markets cut Federal Reserve (Fed) tightening expectations for September, while also flagging upcoming United States (US) inflation data and Euro area Gross Domestic Product (GDP) as key for EUR/USD traders.

Dollar slides as Fed bets fade"In the US, the July jobs report came in on the weak side with nonfarm payrolls coming in at -23k (cons: +80k, Danske: +70k) and cumulative revisions for May-June firmly negative at -103k. The unemployment rate nonetheless fell to 4.1% (cons: 4.2%, Danske: 4.2%). At the same time, the labour market participation rate declined to 61.4%, which is the weakest level since February 2021. "

"We do not think this report is as unambiguously dovish as the initial moves in UST yields and USD FX implied, leaving the Fed in a difficult position balancing below-expectations job growth against a still-declining unemployment rate. Fed's Barkin's initial commentary acknowledged the weakness in the labour market data, while pointing to continued resilient corporate earnings."

"Consequently, the market now discounts 11bp of hike from the Federal Reserve at the next meeting in September."

"The USD took a hit on Friday and the US jobs report significantly disappointed expectations. The USD lost ground against the rest of G10 currencies. EUR/USD rose briefly to 1.1581 - the highest level in almost two months."

"In the euro area, the Sentix Investor Confidence indicator is due. The index rose sharply in in July, marking the third consecutive monthly improvement, driven by rising expectations. Today's release will provide a read on whether momentum continues."

"The week closes on Friday with the second release of euro area Q2 GDP, including details. "

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

Key Highlights

EUR/USD started a fresh increase above the 1.1520 resistance. A contracting triangle is forming with resistance at 1.1600 on the 4-hour chart. GBP/USD could gain pace if it clears the 1.3550 resistance. Gold prices climbed higher above $4,350 and might continue to rise. EUR/USD Technical Analysis The Euro formed a base above 1.1380 against the US Dollar. EUR/USD started a fresh increase above the 1.1450 and 1.1500 resistance levels.

Looking at the 4-hour chart, the pair gained pace for a move toward 1.1580. A high was formed at 1.1581, and the pair is now consolidating gains above the 23.6% Fib retracement level of the upward move from the 1.1352 swing low to the 1.1581 high.

The pair is now well above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). On the upside, the pair could face resistance near 1.1580.

The next major resistance might be 1.1600. There is also a contracting triangle forming with resistance at 1.1600. A close above 1.1600 could start another steady increase. In the stated case, the bulls could aim for a move to 1.1650.

Any more gains might open the doors for a test of 1.1685. If there is a downside correction, the pair might find bids near 1.1540. The next major support could be near 1.1500.

The main support might be 1.1465 and the 50% Fib retracement. A downside break and close below 1.1465 might send the pair toward 1.1400. Any more losses could open the doors for a test of 1.1350.

Looking at GBP/USD, the pair seems to be gaining pace above 1.3450 and might aim for a retest of the 1.3550 resistance.

Upcoming Key Economic Events:

Euro Zone Sentix Investor Confidence for August 2026 – Forecast -3.2, versus -3.1 previous.

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EUR/USD Talking Points: EUR/USD finished the week with a big test of resistance at prior support, extending the breakout from the prior week but with an abundance of questions over drivers as it still appears that the main FX flows are coming from the USD/JPY setup. For next week, there’s a lot importance around the US CPI report as shows of slower inflation can impact US rate hike odds which can then further impact that USD/JPY carry trade. And if we do see more long-term longs closing then USD-weakness can drive in several other markets, EUR/USD included.

It’s rare that the Euro isn’t the major driver of the Dollar basket, because after all, it is a whopping 57.6% component of DXY. But the reality is sentiment matters, as does positioning, and if we’re seeing that massive carry trade in USD/JPY unwind with USD selling and JPY gaining, well even the larger major pair of EUR/USD can be impacted.

We saw this happen back in July of 2024, when nothing especially great was happening for the Eurozone economy yet EUR/USD gained almost 500 pips in Q3. But remember, these are FX pairs that we’re talking about so there’s two components, and even if the Euro is hovering or treading water, the act of the US Dollar dropping can lift the net value for the pair which is what happened.

Back then it was a BoJ intervention on the morning of a US CPI print creating a perfect storm. To that point there was doubt as to whether the Fed would actually be able to cut rates. That CPI print cemented expectations that they would be able to, and with an assist from the Bank of Japan intervening, suddenly, long positions in USD/JPY had reason to bail. And that USD-weakness had a significant impact on FX markets across-the-board, EUR/USD included. We saw a small snippet of that two weeks ago when a coordinated intervention pushed USD/JPY down by almost 900 pips, helping to prod a breakout in EUR/USD as the pair pushed out of a falling wedge formation and continued to rally through last week until finally finding resistance at a familiar area of 1.1576.

EUR/USD Daily Chart Chart prepared by James Stanley; data derived from Tradingview EUR/USD Shorter-Term At this point there’s a short-term pattern of higher-highs and lows that trend traders can work with, especially the focal point around the 1.1500 handle that I had looked at in last week’s webinar. That zone can be extended up to the higher-low of 1.1515 to create an area to look for bullish defense on pullback scenarios. A bit closer to current price as we wind towards the weekly close is a prior point of resistance at 1.1560, and below 1.1500 there’s a spot of prior resistance from 1.1455-1.1469 that remains relevant.

If bulls fail to hold prices above that last zone, it’s going to begin to look as though the breakout and fresh rally has failed.

EUR/USD Four-Hour Chart Chart prepared by James Stanley; data derived from Tradingview --- written by James Stanley, Senior Market Analyst, Global Macro

Euro Technical Forecast: EUR/USD Weekly Trade Levels EUR/USD has rallied more than 2% from the yearly low after last week's outside-week reversal. The recovery is now confronting it’s the first technical hurdle since breaking out of the July range. Weekly momentum is attempting to confirm a broader shift after diverging into the yearly low. Holding above the July breakout zone would reinforce the recovery, larger test of yearly downtrend is eyed just higher. Resistance 1.1578, 1.1639/49 (key), 1.1746/75- Support 1.1469/83, 1.1355/94 (key), 1.1228 EUR/USD has extended its recovery from the yearly low after last week's outside-week reversal triggered a decisive breakout from the July consolidation range. The rally has now reached the first major resistance zone since the June decline began, making this an important test of whether buyers can sustain the improving technical backdrop. With weekly momentum showing signs of turning higher and key U.S. inflation data on tap next week, traders will be watching closely for confirmation on whether this recovery has room to develop into a broader trend reversal. Battle lines drawn on the EUR/USD weekly technical chart.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this EUR/USD technical setup and more. Join live on Monday’s at 8:30am EST.

Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Technical Forecast we noted that the July opening range was set just above pivotal support and that, “From a trading standpoint, the April downtrend remains intact while below 1.1649, but the bears are vulnerable while above 1.1355.” EUR/USD spent more than five-weeks coiling within the July range before breaking out into the close of the month. An outside weekly reversal off the lows last week has extended more than 2.2% off the yearly low with the rally now testing the first major resistance hurdle on the back of a weaker than expected US employment report.

EUR/USD Weekly RSI

The immediate focus is on the weekly close with respect to the January low at 1.1578. Note that weekly momentum has is attempting to break above 50 for the first time since May after marking divergence into the yearly low. A momentum trigger extending off the 2025 high-close remains in place and may offer further guidance in the weeks ahead.

Initial weekly support now rests at the July breakout zone near 1.1469/83 with key support steady at 1.1355/65- a region defined by the 38.2% retracement of the 2025 advance and the April high-week close. The median-line of the broader 2022 uptrend converges on this level and a break / weekly close below would be needed to fuel the next major leg of the January downtrend. Subsequent support rests at the 2026 high close at 1.1228 and 1.1110/64.

A confirmed breakout from here exposes the next major resistance zone at the 61.8% retracement of the April decline and the 52-week moving average at 1.1639/49. Note that the 61.8% parallel converges on this threshold next week and strength beyond this slope would suggest a more significant low was registered in June. Ultimately a breach above the 1.1745/75 is needed to invalidate the yearly downtrend and put the bulls back in control.

           

Bottom line: EUR/USD rebounded off major support last week with the recovery now testing the first technical hurdle. From a trading standpoint, a good level to reduce portions of long-exposure / raise protective stop- losses would need to be limited to the 1.1469 IF price is heading higher on this stretch. Look for a larger reaction near 1.1650 IF reached.

Today's weaker-than-expected Non-Farm Payrolls report prompted markets to scale back expectations for a September rate hike, with Fed funds futures now implying a 56% probability the Fed leaves policy unchanged next month. The focus now shifts to Wednesday's CPI report, which will provide the next major test for the inflation outlook. With labor market conditions showing signs of moderation, softer inflation data would reinforce the case for a less restrictive policy path, reducing the dollar's yield advantage and supporting the euro's recovery. Stay nimble into the release and watch the weekly close for guidance. Review my latest Euro Short-term Outlook for a closer look at the near-term EUR/USD technical trade levels.

Key Euro / US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts Swiss Franc (USD/CHF) Gold (XAU/USD) US Dollar Index (DXY) Australian Dollar (AUD/USD) Canadian Dollar (USD/CAD) S&P 500, Nasdaq, Dow Bitcoin (BTC/USD) Japanese Yen (USD/JPY) British Pound (GBP/USD) --- Written by Michael Boutros, Senior Technical Strategist

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A dull week ends with the EUR/USD pair surging to a fresh multi-week high, trading around 1.1560 ahead of the close. Optimism about an end to the Middle East conflict dominated the headlines throughout the first half of the week, only to be followed by the usual delays and diluted hopes.

War headlines keep shaping sentimentUnited States (US) President Donald Trump kept repeating throughout the week that he believed that the war with Iran would be over “soon.” Market players, however, believe the ongoing pause in the Middle East crisis has more to do with reports suggesting the US Army is running out of highly accurate long-range missiles after its five-month war with Iran.

Also, Iran’s chief negotiator Mohammad Bagher Ghalibaf accused Trump of staging “theater diplomacy,” accusing the US of bullying and breaking promises. Tehran presented a plan on how to manage the Strait of Hormuz, which includes blocking the critical passage to US and Israeli ships. Traffic through the critical passage remains restrained, while skirmishes between different Middle East countries continue.

On a positive note, Oil prices remained within familiar levels, with the barrel of West Texas Intermediate (WTI) crude trading around $77 as the week comes to an end.

United States weak labor market?Markets also took note of the US labor market health, with soft readings coupled with persistent inflation-related concerns weighing on the US Dollar (USD). ISM published the July Purchasing Managers’ Index, which showed business activity in the country remained in expansionary territory, with the Manufacturing Index printing at 55.6, and the Services PMI climbing to 54.1. The reports, however, also showed that the Price Paid Indexes linked to both sectors came in higher than anticipated and above 70, hinting at persistent inflationary pressures.

Regarding employment figures, JOLTS Job Openings edged modestly lower in June, although hiring remained unchanged. The ADP Employment Change survey showed that the private sector added measly 44K new jobs in July, down from the 95K previous and the expected 70K, while the Challenger Job Cuts report showed that US-based employers announced 33,429 cuts in July, down from the 45,849 registered in June.

Finally, the Nonfarm Payrolls (NFP) report released on Friday showed that the country lost 23K jobs in July while the June reading was downwardly revised to measly 20K from the original estimate of 57K. On a positive note, however, the Unemployment Rate shrank to 4.1%, its lowest in over a year, although the labor force Participation Rate also eased a tad, to 61.4% from the previous 61.5%.

Euro lacking life of its ownFinancial markets are all about sentiment and EUR/USD moved accordingly to USD strength/weakness, with the shared currency lacking life of its own.

Data from the Union was far from encouraging: Retail Sales in Germany fell 0.2% in June vs the previous 2.1% advance, while the Eurozone figure for the same month came in at -0.3%, down from the 0.4% advance posted in May. Also, the bloc Producer Price Index (PPI) rose 4.6% in the year to June as expected, down from the previous 5.9%.

The Euro was unable to attract buyers despite European Central Bank (ECB) President Christine Lagarde warning that surging Oil prices could shape the September rate decision, hinting at an interest rate hike at the next meeting. Indeed, data supports the case for another hike, as euro area annual inflation is expected to be 2.9% in July 2026, up from 2.8% in June according to a flash estimate from Eurostat, the statistical office of the European Union.

What’s next in the docketInflation takes center stage in the upcoming days, as the US will release the July Consumer Price Index (CPI) on Wednesday. Annual inflation, as measured by the CPI, is foreseen at 3.4%, slightly below the 3.5% posted in June. On the same day, Germany will unveil the final reading of the July Harmonized Index of Consumer Prices (HICP), while the US will publish the July Producer Price Index (PPI) on Thursday, previously at 5.5%. Friday will bring the first revision of the Eurozone Q2 Gross Domestic Product (GDP), US Retail Sales and the preliminary estimate of the July Michigan Consumer Sentiment Index.

And of course, the focus will remain on Middle East developments and how Oil Prices react to headlines.

EUR/USD Technical Outlook:

The EUR/USD pair turned bullish, according to technical readings in the daily chart, although it still faces some barriers before confirming a steeper advance. The pair holds above the 20-day Simple Moving Average (SMA), which advances to 1.1453, but remains below the 100-day SMA at 1.1569 and the 200-day SMA at 1.1629, both flat. The 14-period Relative Strength Index (RSI) indicator aims north at 62, while the Momentum indicator also advances above its midline, suggesting ongoing bullish pressure despite the pair struggling to decisively reclaim its heavier moving averages overhead.

In the weekly chart, EUR/USD trades just under the 20-week SMA at 1.1566, which caps the upside and keeps the near-term tone neutral. The pair remains above both the 100-week SMA at 1.1316 and the 200-week SMA at 1.1041, suggesting a broadly constructive medium-term backdrop even as near-term momentum stalls. The Momentum indicator remains below its midline, while the RSI hovers near the 50 line, suggesting a lack of clear directional pressure and favoring consolidation over trend extension for now.

On the topside, initial resistance is located at the 100-day SMA at 1.1569, with a stronger barrier at the 200-day SMA near 1.1629, where sellers could reassert control if tested. On the downside, immediate support is provided by the 20-day SMA at 1.1453, and a daily close back under this short-term average would hint at fading upside momentum and open the door for a deeper pullback within the broader range.

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

Commerzbank’s Thu Lan Nguyen argues that the US Dollar's (USD) current support from perceived hawkish Federal Reserve (Fed) policy is likely to fade as markets reassess United States (US) rate expectations over coming quarters. While Euro (EUR) upside is seen as limited due to energy-related growth and rate headwinds, EUR/USD is still forecast to grind higher towards 1.19 by end-2027 as US rate expectations ease.

Dollar strength seen moderating"The US dollar is currently benefiting from a Federal Reserve that markets continue to perceive as relatively hawkish. However, this narrative has shown the first signs of cracking since the July FOMC meeting. Despite this, markets still price in further US rate hikes."

"We believe these expectations are overly optimistic and expect a reassessment of the rate outlook over the coming quarters, which should weigh on the dollar. While ECB rate expectations also appear somewhat stretched, the euro is likely to benefit more than the US currency from a resolution of the US-Iran conflict."

"If, as we expect, tensions between the US and Iran continue to ease towards year-end, inflationary pressures should moderate considerably next year. In that environment, the Fed could once again shift its focus towards supporting growth and eventually even resume its rate-cutting cycle."

"We therefore expect US rate expectations to be revised materially lower over the coming quarters, a development that should ultimately weigh on the dollar. However, the depreciation is unlikely to be quite as pronounced as we had previously assumed as we have to acknowledge that the risk that the Fed will hike rates in the coming months after all has increased. We now see EUR/USD at 1.19 (previously 1.21) at the end of next year."

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