What to Know

  • EUR/USD rose to its highest level since June 17 after soft US macroeconomic data pressured the US dollar.
  • The pair reached 1.1570, rebounding strongly from the year-to-date low of 1.1325.
  • US headline CPI and core CPI eased in July to 3.5% and 2.4%, respectively, while remaining above the 2% target.
  • US retail sales dropped sharply in July as consumers pulled back on spending.
  • A prior labor market reading showed nonfarm payrolls dropped by 23k in July.
  • Market participants are watching US housing starts and building permits on Tuesday, followed by minutes from the last Federal Reserve meeting.
  • European inflation data is also in focus, with economists expecting headline CPI at 2.9% in July and core CPI at 2.5%.
  • EUR/USD has moved above 1.1480, the July 15 high and the neckline of a double-bottom pattern.
  • The pair is trading above the 50-day Exponential Moving Average and is forming a bullish flag pattern.
  • Technical traders are watching 1.1600 as a confirmation area and 1.1650 as the next bullish target, while downside scenarios focus on 1.1500.

EUR/USD Rally Extends as Dollar Pressure Builds

EUR/USD entered the new week with bullish momentum after climbing to its highest level since June 17. The pair traded at 1.1570, marking a notable recovery from the year-to-date low of 1.1325. The move reflected a combination of softer US economic data, reduced expectations for tighter Federal Reserve policy, and improving technical structure on the daily chart.

The euro’s rebound against the dollar has become one of the more closely watched moves in the currency market because it brings several important resistance levels back into play. After struggling earlier in the year, EUR/USD has regained traction above key chart levels and is now approaching an area that could determine whether the latest recovery develops into a more durable advance.

The shift has been driven largely by weakness in the US dollar. Reports released on Wednesday and Thursday showed inflation pressures cooling in July. Headline CPI softened to 3.5%, while core CPI dropped to 2.4%. Although those readings still sit above the 2% target, the direction of travel gave traders a reason to reassess how much pressure remains on the Federal Reserve to keep policy restrictive.

Soft US Data Reduces Pressure on the Fed

The latest inflation figures arrived alongside other signs of softness in the US economy. Retail sales dropped sharply in July as consumers cut back on spending, adding to concerns that household demand may be losing momentum. A week earlier, labor market data showed that nonfarm payrolls dropped by 23k in July, another signal that the economy is facing strain.

For the Federal Reserve, the combination of softer inflation, weaker retail activity, and a negative payroll reading complicates the policy outlook. Higher interest rates can restrain inflation, but they can also weigh on hiring, consumption, credit conditions, and broader economic activity. With multiple data points pointing to softer momentum, market participants have interpreted the recent figures as reducing the likelihood that the Fed will feel compelled to hike interest rates this year.

That shift has been reflected in market pricing. Odds of the Fed hiking interest rates this year dropped sharply on Polymarket, highlighting how quickly sentiment changed after the latest data. While the inflation rate remains above target, weaker demand and labor indicators suggest that another rate increase could place additional pressure on the economy.

There is still uncertainty around how long inflation may remain above the 2% target. The US and Iranian quagmire remains a risk factor, with President Donald Trump focusing on economic pressure on Iran as the US military runs out of weapons. That backdrop keeps geopolitical risk in the conversation and could complicate the inflation outlook if price pressures persist.

Upcoming US and European Data Set the Next Catalyst

EUR/USD traders are now looking ahead to several scheduled catalysts that could influence the next leg of price action. The pair will react to US housing starts and building permits on Tuesday, two data points that offer insight into the health of the housing sector. Housing is sensitive to interest rates, financing costs, confidence, and consumer balance sheets, so these reports can affect expectations for growth and monetary policy.

After that, attention will turn to the minutes from the Federal Reserve’s last meeting. The minutes may provide more detail on how policymakers assessed inflation, labor conditions, consumer spending, and the case for keeping rates steady or adjusting policy. Traders will look for any signs of division within the central bank, particularly around the balance between inflation risk and growth risk.

The European side of the equation is also important. The pair will react to the upcoming European inflation report, which economists expect to show headline CPI rising 2.9% in July and core CPI rising 2.5%. Both readings would remain above the European Central Bank’s 2.0% target, keeping the inflation debate active in the euro area as well.

If European inflation remains sticky while US data continues to soften, the policy gap narrative could continue to favor the euro. However, if European data disappoints or US numbers rebound, EUR/USD could struggle to extend gains. For now, the setup remains data dependent, with traders balancing central bank expectations on both sides of the Atlantic.

Technical Picture: Bullish Flag Forms Above Key Support

The technical backdrop has strengthened in recent sessions. EUR/USD has rebounded and is hovering near its highest level in two months. Importantly, the pair has moved above 1.1480, a key resistance level that also marked the July 15 high and the neckline of a double-bottom pattern.

A double-bottom pattern is often tracked by technical traders as a potential reversal structure. When price breaks above the neckline, it can suggest that downside pressure has eased and that buyers have regained control. In this case, the move above 1.1480 helped improve the bullish argument and gave traders a clearer reference point for support and invalidation.

The pair has also climbed above the 50-day Exponential Moving Average. Moving averages are widely used to assess trend direction and momentum. When price trades above a key average, it often indicates that buyers are gaining strength, especially when the move is supported by improving macro conditions.

EUR/USD is also in the process of forming a bullish flag pattern. This structure typically appears after a sharp upward move, followed by a period of controlled consolidation. Technical traders often view bullish flags as continuation patterns, meaning the prior advance may resume if price breaks out of the consolidation zone.

Key Levels: 1.1600, 1.1650, 1.1500 and 1.1480

The immediate upside level to watch is 1.1600. A move above that area would be viewed by some chart watchers as confirmation that bullish momentum remains intact. If EUR/USD clears 1.1600, the next widely watched target is 1.1650, a psychological and tactical level highlighted by technical traders following the current setup.

The bullish trading framework centers on buying EUR/USD with a take-profit at 1.1650 and a stop-loss at 1.1500. That view is based on the expectation that the bullish flag pattern can resolve higher over a timeline of 1-2 days. The case is supported by the pair’s recovery above 1.1480, its position above the 50-day Exponential Moving Average, and the softer tone in recent US data.

The bearish framework takes the opposite side, with sellers looking for a move toward 1.1500 and using 1.1650 as a stop-loss level. This scenario would gain relevance if EUR/USD fails to break above 1.1600 or if upcoming data strengthens the dollar. A loss of bullish momentum near current levels could pull the pair back toward the recently reclaimed breakout region.

The 1.1480 level remains important because it was previously resistance and the neckline of the double-bottom structure. If EUR/USD were to fall back below that zone, some technical traders could question the strength of the breakout. For now, however, the pair remains elevated and bulls appear focused on whether price can push through 1.1600.

Market Outlook: Bulls Hold the Advantage, But Data Risk Remains

The EUR/USD outlook leans constructive as long as the pair remains above its key breakout levels and US data continues to soften. The bullish flag, the move above the 50-day Exponential Moving Average, and the reclaiming of 1.1480 all support the argument for additional gains. A confirmed break above 1.1600 would strengthen the case for a move toward 1.1650.

Still, traders should treat the setup as conditional rather than guaranteed. Inflation remains above target in both the United States and Europe, and central bank expectations can shift quickly when new data arrives. The upcoming housing numbers, building permits, Federal Reserve minutes, and European CPI figures may all influence direction.

For now, EUR/USD is benefiting from a weaker dollar narrative and improved chart momentum. If those conditions persist, the pair may continue to attract buyers on dips. If the data surprises in favor of the dollar, however, the advance could stall and the downside scenario toward 1.1500 could become more relevant.

FXCOINZ will continue to monitor the pair’s reaction around 1.1600 and 1.1650, as these levels may define whether the latest rally evolves into a broader bullish continuation or pauses near resistance. The next several sessions could be important for confirming whether euro bulls can maintain control after the sharp rebound from 1.1325.

Frequently Asked Questions (FAQs)

Why did EUR/USD rise to a two-month high?

EUR/USD rose after weak US macroeconomic data pressured the dollar. Softer inflation readings, a sharp drop in retail sales, and a nonfarm payrolls decline of 23k in July reduced expectations that the Federal Reserve would face pressure to hike interest rates this year.

What price did EUR/USD reach in the latest move?

The pair rose to 1.1570, its highest level since June 17. That marked a strong rebound from the year-to-date low of 1.1325 and brought several important technical levels back into focus.

What are the key bullish levels for EUR/USD?

Technical traders are watching 1.1600 as a confirmation level for further gains. If price breaks above that area, the next bullish target is 1.1650.

What is the bearish scenario for EUR/USD?

The bearish setup focuses on selling EUR/USD with a take-profit at 1.1500 and a stop-loss at 1.1650. This scenario may gain attention if the pair fails to break above 1.1600 or if upcoming data supports a stronger US dollar.

Why is 1.1480 important?

The 1.1480 level was the highest level on July 15 and the neckline of a double-bottom pattern. EUR/USD moving above this level improved the technical outlook and turned it into a key area for traders to monitor.

What does the bullish flag pattern suggest?

A bullish flag is often viewed as a continuation pattern. In this case, some chart watchers believe the formation could support further gains if EUR/USD breaks above 1.1600.

What US data should traders watch next?

Traders are watching US housing starts and building permits on Tuesday, followed by minutes from the last Federal Reserve meeting. These releases may shape expectations for growth, inflation, and interest-rate policy.

What European data matters for EUR/USD?

The European inflation report is a key event. Economists expect headline CPI to rise 2.9% in July and core CPI to rise 2.5%, with both readings remaining above the European Central Bank’s 2.0% target.

What is the short-term EUR/USD outlook?

The short-term outlook leans bullish while EUR/USD holds above key support and momentum remains constructive. A break above 1.1600 would support the case for 1.1650, while failure to extend gains could bring 1.1500 back into focus.

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