The EUR/USD exchange rate opened steady on Monday morning as traders closely assessed the upcoming moves from the European Central Bank (ECB) and the Federal Reserve (Fed).
The pair was trading at 1.1705, marking a strong recovery from its year-to-date low of 1.0190, highlighting renewed market optimism in the euro versus the US dollar. Sofia Beloff, working as a broker at AureliusHub, delivers a thoughtful and in-depth analysis of this matter.
Fed and ECB Next Moves
The EUR/USD pair gained momentum last week after a series of important US macroeconomic data releases. The headline Consumer Price Index (CPI) remained stable at 2.7% in July, while core inflation, which excludes volatile food and energy prices, rose to 3.1%. These inflation figures suggest a moderately robust US economy, creating uncertainty regarding Federal Reserve rate cuts.
Another key report showed that the core Producer Price Index (PPI) surged to 3.6%, indicating that corporate input costs are rising. Analysts linked this spike to the trade tariffs implemented by the US President.
These tariffs continue to pressure business margins, with levies from the European Union now at 15%, while Swiss and Brazilian tariffs climbed to 39% and 50%, respectively. This geopolitical tension has significant implications for USD strength and EUR/USD volatility.
In addition, US retail sales rose by 0.5% in July, following a revised 0.9% increase in June. The growth was broad-based, with 9 out of 13 categories showing gains, signaling resilient consumer spending despite higher tariffs and a slightly deteriorating labor market.
Analysts noted that Amazon Prime Day, Walmart deals, and other retail events contributed to the positive momentum in retail sales, reflecting robust domestic demand.
The combination of strong inflation readings and steady retail performance prompted investors to reduce expectations for aggressive Federal Reserve rate cuts. While the market largely anticipates a rate cut in September, some traders are adjusting expectations for a slight delay, depending on upcoming economic indicators.
On the European front, the EUR/USD pair will likely react to Tuesday’s US building permits and housing starts data, as well as a speech by Fed official Michele Bowman. Meanwhile, Eurostat is set to release the latest European inflation figures on Wednesday, which could influence ECB policy expectations and overall EUR/USD positioning.
EUR/USD Technical Analysis
From a technical standpoint, the eight-hour chart shows a clear upward trajectory, with the EUR/USD rising from a low of 1.1391 earlier this month to 1.1700 today. The pair has moved above the 50-period moving average, indicating a bullish trend and suggesting that momentum is on the upside.
Importantly, the EUR/USD has formed an inverse head-and-shoulders pattern, a classic bullish reversal formation. The head of the pattern is located at 1.1391, while the neckline, marked in black on the chart, lies just below the recent high swings since July.
This technical formation signals that the pair is poised for further upside, with bulls targeting resistance levels higher on the chart.
The formation of the inverse head-and-shoulders pattern indicates a shift in market sentiment, where buyers are gradually overpowering sellers, reinforcing the probability of an upward breakout. Traders often watch the break of the neckline as a confirmation signal, suggesting that the EUR/USD rally could accelerate toward key resistance levels.
Key Resistance Levels and Outlook
The immediate resistance for the EUR/USD pair is at 1.1827, a significant level as it represents the highest point this year. If the pair breaks above this resistance, the bullish momentum could attract additional long positions, pushing the EUR/USD even higher.
Conversely, support levels are expected near 1.1600–1.1650, corresponding to the recent moving average and swing lows, which provide a safety net for bullish traders.
Overall, the technical setup, combined with the macro backdrop, suggests that EUR/USD bulls have the upper hand in the near term. The interplay of US economic resilience, tariff-related inflationary pressures, and ECB monetary policy expectations continues to shape trader positioning.
Conclusion
In conclusion, the EUR/USD forex signal points to a bullish bias as an inverse head-and-shoulders pattern forms on the eight-hour chart. With the exchange rate climbing above the 50-period moving average and targeting resistance at 1.1827, the pair reflects renewed strength in the euro against the US dollar.
Combined with key macroeconomic developments from both the US and Europe, traders have multiple technical and fundamental cues to guide their EUR/USD strategies in the coming sessions.
The EUR/USD exchange rate remains a focal point for forex traders, with both central bank actions and economic indicators set to influence its trajectory. Given the current inverse head-and-shoulders pattern, the probability of further gains is high, making it a key pair to watch for short- to medium-term forex strategies.
