FX.co ★ EUR/USD

Market Analysis and Insights: EUR/USD is entering the new week at a critical technical and fundamental crossroads. The pair has recently retreated from the 1.17 area, where it reached a multi-month high, as renewed U.S. dollar demand and rising Federal Reserve rate expectations pressured the euro. The latest U.S. inflation data showed PCE inflation at 3.7% year-on-year, while Federal Reserve Chair Kevin Warsh adopted a firm anti-inflation stance at Jackson Hole, pushing September rate-hike expectations materially higher. At the same time, the ECB is preparing for another possible rate increase as euro-area inflation remains elevated. The immediate tone is therefore cautiously bearish below 1.1600, although euro support from ECB tightening expectations limits the downside. Fundamental Analysis: The ECB kept rates unchanged at its July meeting after raising them in June, but policymakers indicated that another increase could be necessary in September if inflation remains elevated. Recent reports suggest officials are leaning toward raising the policy rate from 2.25% to 2.50% at the September 9–10 meeting. Inflation pressures have been amplified by higher energy prices and geopolitical disruption, while the euro-area economy has shown greater resilience than previously feared. Eurozone GDP expanded 0.4% quarter-on-quarter in Q2 2026, while employment increased 0.1%. The combination of persistent inflation and reasonable economic resilience gives the ECB justification for maintaining a restrictive stance. However, tighter credit conditions are becoming a concern, with business lending slowing, meaning aggressive ECB tightening could eventually weigh on growth. For EUR/USD, the euro's major advantage is that the ECB is currently moving toward tighter policy at the same time that investors are reassessing the Fed's next move. The Federal Reserve currently maintains its policy rate around 3.50%–3.75%, but persistent inflation is increasing pressure for another hike. July headline PCE inflation remained at 3.7%, while core PCE held at 3.3%, both considerably above the Fed's 2% objective. U.S. economic growth has nevertheless remained relatively resilient, with second-quarter GDP growth at 1.5% and expectations for stronger third-quarter activity supported by income growth and business investment. The main weakness is the labour market: July payrolls unexpectedly declined by 23,000, leaving the upcoming August employment report extremely important for monetary-policy expectations. Warsh's Jackson Hole comments have nevertheless pushed markets toward a more hawkish Fed interpretation, with the probability of a September hike rising to approximately 55.7%. This has increased Treasury yields and revived dollar demand. Consequently, the current policy differential remains slightly USD-positive, although a weak U.S. jobs report could quickly reverse that advantage. H4 Chart Technical Analysis – EUR/USD Price Structure and Four-Hour Momentum The pair previously established strong buying interest above 1.1500 and advanced toward the 1.1680–1.1700 region, but the subsequent rejection has created a short-term corrective structure. Immediate support is concentrated around 1.1570–1.1550, followed by the more important 1.1520–1.1500 area. A sustained break below 1.1500 would significantly weaken the recent bullish structure and expose 1.1460–1.1470, while deeper selling could target 1.1420. On the upside, EUR/USD must first reclaim 1.1600, with 1.1620 representing the next important barrier. A confirmed Four-hour close above 1.1620 would strengthen the bullish case toward 1.1680–1.1700. Earlier Four-hour analysis identified 1.1535 as important trend-line support and 1.1580–1.1620 as the main resistance corridor. The current price structure therefore favours sellers while EUR/USD remains below 1.1600, but buyers still have a viable reversal opportunity if 1.1550–1.1500 continues to attract demand.

The latest available technical readings reinforce the short-term bearish bias. EUR/USD's RSI(14) was around 23.3, indicating deeply oversold conditions, while MACD remained negative at approximately -0.002, confirming downside momentum. ADX was around 46, showing that the prevailing trend has significant strength, while ATR was near 0.0014, equivalent to roughly 14 pips, indicating elevated short-term volatility. The moving-average structure was also bearish: the 5-period SMA stood near 1.1583, the 20-period near 1.1627, the 50-period around 1.1641, and the 200-period around 1.1655, leaving price below the major averages. This combination indicates clear short-term seller dominance, although the oversold RSI warns against chasing the decline at current levels. A bullish candlestick rejection around 1.1550–1.1570, followed by a Four-hour close above 1.1600, would provide the first meaningful reversal signal. Conversely, a decisive Four-hour close below 1.1500 would indicate that the correction is developing into a deeper bearish phase, with 1.1460 and 1.1420 becoming the next downside targets. Overall outlook: The dominant short-term bias is bearish below 1.1600, but EUR/USD is approaching technically oversold territory. The key battle zone is 1.1550–1.1600. Holding 1.1550 and reclaiming 1.1600 could restore bullish momentum toward 1.1620 and 1.1680, while a break below 1.1500 would strengthen the bearish outlook toward 1.1460 and potentially 1.1420. The upcoming U.S. employment data will be particularly important because a strong report could reinforce Fed-hike expectations and accelerate dollar gains, whereas a weak report could trigger a sharp EUR/USD rebound.