Expectations of a Fed rate cut in September remain the key driver for the currency market. Market participants maintain a high level of confidence in a 25-basis-point move. Additional pressure on the dollar comes from profit-taking and cautious investor interest in risk assets.
EURUSD dynamics continue to form amid contrasting signals from the Federal Reserve and ECB, as well as the market’s reaction to fresh macroeconomic data.
This forecast reviews possible EURUSD movements.
EURUSD forecast for this week: quick overview
- Market focus
The EURUSD pair ended the week at 1.1660, hovering in the middle of its recent months’ range. The dollar index consolidated around 98 after volatile moves caused by Jerome Powell’s speech at Jackson Hole and political pressure on the Fed. Markets now price in an 86% probability of a September rate cut, up from 75% the week before. An additional factor was the revised US Q2 GDP data (+3.3% q/q) and signs of inflation risks.
- Current trend
The pair remains in a sideways range between the 1.1570 support level and the 1.1740 resistance level. The dollar is supported by strong US economic data and hawkish statements from some Fed officials. Meanwhile, the euro finds support from diminishing expectations of imminent ECB action.
Political uncertainty rises, with France’s far-right opposition gaining traction, increasing the risk for the eurozone.
- Outlook for 1-5 September
The baseline scenario suggests trading within the 1.1570-1.1740 range. Consolidation above 1.1740 could open the path to 1.1830, while a breakout below 1.1570 would add to pressure and potentially push the pair lower towards 1.1380.
The balance of factors remains mixed: the dollar benefits from macroeconomic data and Trump’s political influence on the Federal Reserve, while the euro is bolstered by moderate demand recovery and technical consolidation.
EURUSD fundamental analysis
During the last week of August, the EURUSD pair rose and tested levels above 1.17. The euro found support amid doubts about the Fed’s independence after Donald Trump’s attempt to remove Lisa Cook from the Board of Governors. This move intensified expectations of earlier monetary easing: the likelihood of a September rate cut rose to 86%, pressuring the USD.
Meanwhile, US macroeconomic data signalled economic resilience. Revised Q2 GDP grew by 3.3% q/q, exceeding expectations thanks to investment and trade contributions.
Strong data limited the dollar’s decline and capped the euro’s rally.
On the European side, political uncertainty in France continues to weigh on the single currency. The resurgence of right-wing parties and an upcoming vote of confidence in Attal’s government limit appetite for long positions. As a result, the week was balanced, with the euro rising on dovish Fed expectations, but upside remaining capped by strong US fundamentals and European political risks.
EURUSD technical analysis
On the daily chart, the EURUSD pair remains within the recent weeks’ range, trading in the 1.1570-1.1740 zone.
After rising in July, the pair repeatedly tested the upper boundary near 1.1740, but failed to consolidate above. The support level lies at 1.1570, which held back the decline on 21-22 August.
Volatility has declined significantly in August: candlesticks are shorter, and the range is narrowing. The MACD and Stochastic indicators point to weak momentum as the market leans towards sideways consolidation rather than forming a new trend.
Thus, the key range remains 1.1570-1.1740. A breakout above 1.1740 would open the path to 1.1830, while a sustained move below 1.1570 would increase downside pressure and create a risk of a decline to deeper support levels. For now, the pair is hovering in the middle of the range, reflecting uncertainty in the fundamental background.
EURUSD trading scenarios
Sentiment for EURUSD remains neutral-to-cautious this week. Markets now estimate the likelihood of a September rate cut at 86%, up from 75% last week. The euro receives mixed signals: political tension in France and dollar strength limit growth, yet the pair holds above 1.1620.
- Buy scenario (long)
Long positions are viable if the pair holds above 1.1620-1.1650. Further confirmation would come from consolidation above 1.1650 and weak US macroeconomic data.
Targets are 1.1710 and 1.1740; with a positive backdrop, a rise to 1.1830 is possible.
Stop-loss is below 1.1580, as a breakout below this level would increase selling pressure.
- Sell scenario (short)
Short positions are possible if the pair breaks below 1.1580, especially amid robust US data and European political uncertainty.
Targets are 1.1500 and 1.1380 if the downward impulse gains traction.
Stop-loss is above 1.1675 – consolidation above this level would confirm a continuation of the upward move.
Summary
Favourable sentiment in EURUSD persists due to expectations of a Federal Reserve rate cut in September. Markets estimate an 86% probability of a dovish move. Despite strong July PPI data, which lowered chances for aggressive easing, interest in risk assets and profit-taking favour the euro.
The overall sentiment can be described as moderately positive.
In the absence of fresh dollar drivers, the euro could hold its ground and test the upper boundary of the August range.
Source: Roboforex