Key Points
- EUR/USD trades at 1.1723, its highest level since July
- ECB expected to hold rates, weighing trade risks and inflation trends
- U.S. CPI data may swing momentum mid-week
The euro maintained strength on Monday, trading at 1.1723, just shy of the 1.1829 July high, as the dollar drifted lower amid growing expectations of a U.S. Federal Reserve rate cut.
Markets are positioning cautiously ahead of a heavy macro calendar, including Thursday’s ECB meeting and a critical U.S. CPI release that could sway September’s Fed policy decision.
Last week’s disappointing U.S. labour market data bolstered the case for a cut, with some traders speculating a larger-than-expected move could be on the cards.
Eurozone Under Pressure
While the ECB is widely expected to keep rates unchanged, policymakers are walking a tightrope between subdued inflation, cross-border trade risks, and a fragile growth outlook.
In France, Prime Minister Francois Bayrou faces a confidence vote. If Bayrou fails in the polls, it may usher in the fifth prime ministerial reshuffle under President Emmanuel Macron in under two years, potentially rattling markets and trader confidence in the bloc’s second-largest economy.
Technical Analysis
EUR/USD is trading at 1.1723, holding steady after a long consolidation phase through late summer. The pair climbed from a February low of 1.0279 to peak at 1.1829 in July before stalling.
Since then, price action has remained range-bound between 1.15–1.18, reflecting uncertainty in both the eurozone and US outlooks.
The moving averages (5,10,30) show a relatively flat alignment, indicating limited directional conviction.
The MACD is hovering close to the zero line, with little divergence, further highlighting the sideways market. Buyers have defended 1.15 as a strong support, but rallies continue to fade below 1.18.
Looking ahead, the euro’s performance hinges on ECB policy guidance and incoming US data. A break above 1.1830 could open room toward 1.20, while slipping under 1.15 risks triggering deeper losses.
Cautious Forecast
While upside momentum remains intact, EUR/USD’s trajectory hinges heavily on Thursday’s ECB language and Wednesday’s U.S. CPI print.
A dovish Fed and a steady ECB could set the stage for a retest of July highs. However, political risk in France may temper euro enthusiasm if instability deepens.
