Expectations for a Federal Reserve rate cut in September remain high despite the July PPI spike in the US, which slightly reduced the odds of more aggressive easing. Profit-taking and moderate demand for risk assets add to pressure on the US dollar.
The overall EURUSD dynamics are shaped by the divergence in monetary policy expectations between the Fed and the ECB, along with market reactions to fresh macroeconomic data. If the Fed maintains its dovish stance, the euro could extend its gains.
This outlook explores what to expect from EURUSD in the second half of August.
EURUSD forecast for this week: quick overview
- Market focus:
The EURUSD pair is hovering around 1.1702, staying close to local August highs. The pair found support after the US PPI data release: the index rose by 0.9% m/m and 3.3% y/y in July, marking the highest monthly gain in three years. These figures reduced expectations for aggressive Fed rate cuts, but did not cancel the scenario for a September easing.
In the eurozone, Q2 GDP grew by 0.3% q/q, beating forecasts and accelerating from Q1. This provided additional support for the euro amid a moderate improvement in the region’s economic outlook.
- Current trend:
The pair ended the week higher, holding above the key support level at 1.1550. The medium-term trend remains upward, and attempts to consolidate above 1.1700 signal an effort to test new August highs. The fundamental driver remains the divergence in monetary policy expectations between the Fed and the ECB, as well as sustained interest in risk assets.
- EURUSD forecast for 18-22 August 2025:
The baseline scenario suggests trading within the 1.1550-1.1740 range, with growing interest in testing the upper boundary if pressure on the dollar persists. Further growth is possible on the back of weak US retail sales and consumer confidence data.
The downside scenario activates if the price breaks below 1.1550, with the pair likely to move towards 1.1380.
EURUSD fundamental analysis
The EURUSD pair ended the week higher near 1.1700 after a volatile series of trading sessions. Support came from eurozone GDP data, which showed positive momentum in Q2 and strengthened expectations for a gradual regional economic recovery. The upbeat figures eased fears of a slowdown and boosted the euro.
On the other hand, the US dollar received short-term support following the release of the US Producer Price Index (PPI) for July. The index rose by 0.9% m/m, marking the fastest pace in three years, and by 3.3% y/y, significantly above forecasts. These data signalled mounting inflationary pressures in the production sector and partially cooled expectations of an aggressive Fed rate cut in September.
The market continues to price in over 90% probability of a 25-basis-point policy easing. Demand for risk assets continues to limit dollar strength.
In the near term, EURUSD dynamics will depend on further macroeconomic signals on both sides of the Atlantic and Federal Reserve commentary on the rate trajectory.
EURUSD technical analysis
The daily chart shows that after rising in March and April 2025, the EURUSD pair consolidated in an uptrend, reaching highs near 1.1830 in early July. Since mid-July, movement has been more sideways, with support around 1.1575 and resistance near 1.1700-1.1720.
Bollinger Bands indicate a moderate narrowing of the range, reflecting reduced volatility compared to spring. The MACD lines remain close to zero, signalling weak trend momentum. After remaining in overbought territory, the Stochastic Oscillator is now moving downwards, indicating potential cooling in short-term growth.
Overall, the chart shows a consolidation phase after a strong spring and summer rally. The key levels to watch are the 1.1575 support level and the 1.1720 resistance level.
EURUSD trading scenarios
Market sentiment for the EURUSD pair for the new week is moderately positive.
The dollar remains under pressure following strong US PPI data for July, which rose by 0.9% m/m and 3.3% y/y, marking the fastest growth in three years. Nevertheless, the market still prices in over 90% probability of a 25-basis-point Federal Reserve rate cut in September, with expectations of a more aggressive step nearly gone.
The euro received additional support from eurozone GDP, which grew by 0.3% q/q in Q2, above forecasts and up from Q1. Against this backdrop, the EURUSD pair consolidated above 1.1650, although a short-term correction remains possible due to local overbought conditions.
- Buy scenario (long):
Buying remains relevant while prices stay above 1.1620-1.1650. Confirmation would come from consolidation above this range and weak US retail sales or consumer sentiment data.
Targets are 1.1730 and, if the news backdrop is favourable, 1.1830.
Stop-loss is below 1.1580, with a breakout below this area opening the way for a downward movement.
- Sell scenario (short):
Short-term selling is possible if the price dips below 1.1580 amid profit-taking and weak economic data from the eurozone. Indicators point to overbought conditions, increasing the likelihood of a corrective decline.
Targets are 1.1500 and 1.1385 if a downtrend develops.
Stop-loss is above 1.1675: a consolidation above this level would confirm the continuation of the uptrend.
Summary
Positive sentiment in the EURUSD pair remains supported by high chances of a Federal Reserve rate cut in September. Despite the sharp rise in the US July PPI, which reduced the likelihood of aggressive easing, the dollar remains under pressure. Another factor is profit-taking and cautious demand for risk assets.
Overall sentiment is assessed as moderately positive. The market awaits fresh signals, with focus on US retail sales, consumer confidence, and Fed commentary. In the absence of strong dollar drivers, the euro could maintain its upward momentum.
Source: Roboforex