The euro has gained against the US dollar, rising by 96 pips to 1.1745 and reaching as high as 1.1759, marking a new peak since 27 July. This suggests a breakout from the recent consolidation phase, particularly if it closes above the highs of August.
Should this upward momentum continue, the euro may face resistance at 1.1789, the high from July, and 1.1830, the high from June, before advancing further. The earlier dip to 1.14 now resembles an inverted head and shoulders pattern, indicating a potential target of over 1.20.
European Central Bank Meeting Outlook
Economically, the European Central Bank is expected to maintain interest rates at its upcoming meeting. European economic data has shown unexpected strength, whereas US data has not met expectations. This situation creates a potential focus on differing monetary policy outlooks, with some seeing a potential recovery in Europe. In Italy, unemployment has reached its lowest in a generation, reflecting improving economic conditions.
With the US dollar weakening after the August 2025 non-farm payrolls report came in soft at just +115,000 jobs, the euro has broken out. We are now seeing the EUR/USD pair at 1.1745, its highest level since late July 2025. This move looks like a genuine break from the recent consolidation, especially as we clear the highs from last month.
For traders, this suggests it’s time to consider long-euro positions, perhaps through call options to capture further upside. The next key resistance levels we are watching are the July high of 1.1789 and the June peak of 1.1830. The chart pattern developing since the dip to 1.14 earlier this summer looks like an inverted head and shoulders, which could ultimately target a return to the 1.20 handle we haven’t seen since Q1 2025.
Market Speculation on Monetary Policy
The fundamental picture supports this view, as European economic data continues to outperform surprisingly weak US numbers. For example, last week’s German IFO Business Climate index beat expectations, while the US ISM Manufacturing report fell into contractionary territory. This divergence will be a key focus at the upcoming European Central Bank meeting on September 11, 2025.
This growing contrast in economic momentum could shift the outlook for monetary policy. The market is now speculating that the ECB has a stronger case to hold rates firm, while pressure builds on the US Federal Reserve. With data like Italian unemployment hitting a multi-decade low of 7.0% in the latest report, we see the narrative of a European cyclical recovery gaining more traction.
