US Dollar Forecast: EUR/USD Eyes Monthly High

US Dollar Forecast: EUR/USD

EUR/USD bounces back ahead of the weekly low (1.1590) to approach the monthly high (1.1730), and the exchange rate may reestablish the bullish trend from earlier this year as it trades back above the 50-Day SMA (1.1631).

US Dollar Forecast: EUR/USD Eyes Monthly High

EUR/USD seems to be staging a V-shape recovery after failing to test the June low (1.1347) at the start of the month, and the exchange rate may further retrace the decline from the July high (1.1830) as the moving average still reflects a positive slope.

However, the recovery in EUR/USD may turn out to be temporary as updates to the US Consumer Price Index (CPI) and Producer Price Index (PPI) warn of persistent inflation, and it remains to be seen if the Federal Reserve will respond to the data prints as Chicago Fed President Austin Goolsbee warns of a ‘note of unease’ following the inflation reports.

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Goolsbee, who votes on the Federal Open Market Committee (FOMC) in 2025, went on to say that ‘services inflation look to be turning up’ while speaking on CNBC, and EUR/USD may face increased volatility over the coming days as Chairman Jerome Powell and Co. gather next week for the Economic Symposium in Jackson Hole, Wyoming.

With that said, EUR/USD may extend the advance from the start of August as the Fed appears to be on course to further unwind its restrictive policy, but the exchange rate may face range bound conditions should it struggle to clear the monthly high (1.1730).

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

EUR/USD approaches the monthly high (1.1730) as it defends the rebound from earlier this week, and a move/close above the 1.1690 (78.6% Fibonacci extension) to 1.1750 (78.6% Fibonacci retracement) zone may lead to a test of the July high (1.1830).
A breach of the September 2021 high (1.1909) opens up the 1.2010 (100% Fibonacci extension) to 1.2040 (161.8% Fibonacci extension) region, but EUR/USD may give back the advance from the start of the month if it struggles to push/close above the 1.1690 (78.6% Fibonacci extension) to 1.1750 (78.6% Fibonacci retracement) zone.
Failure to hold above the weekly low (1.1590) may push EUR/USD toward 1.1560 (100% Fibonacci extension), with the next area of interest coming in around 1.1390 (78/6% Fibonacci extension) to 1.1440 (61.8% Fibonacci extension), which incorporates the monthly low (1.1392).

Additional Market Outlooks

US Dollar Forecast: USD/CHF Recovers from Fresh Monthly Low

Australian Dollar Forecast: AUD/USD Climbs to Fresh Monthly High

USD/JPY Pulls Back from Fresh Weekly High as US CPI Holds Steady

Canadian Dollar Forecast: USD/CAD Bounces Back Ahead of 50 Day SMA

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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