EUR/USD Price Forecast – Euro Holds $1.1710, Eyes Breakout to $1.1830
EUR/USD Holds 1.1700 as Fed Dovish Bets Collide With Trade Uncertainty
The EUR/USD pair is consolidating above 1.1707 after testing intraday highs of 1.1736, maintaining resilience despite thin U.S. trading volumes on Labor Day. August closed with the euro delivering a 2.4% monthly gain, its seventh positive month out of the last eight, underpinned by persistent dollar weakness and growing conviction that the Federal Reserve will cut rates at the September 16–17 meeting. Futures imply an 87–89% probability of a 25 bp reduction, while markets are debating whether a second cut before year-end is also possible.
Tariffs, Courts, and Trump’s Influence on Policy Drive Sentiment
U.S. trade policy is now a central driver for the EUR/USD. Fitch slashed its 2025–26 U.S. GDP forecast to 2.2% from 2.9%, citing tariffs that have risen to an effective 15–20% versus 2.5% last year. Oxford Economics estimates global GDP losses near $1 trillion over two years as higher tariffs filter through global supply chains. Meanwhile, a U.S. appeals court ruled Trump’s “reciprocal tariffs” illegal, but enforcement is delayed until October 14, giving the White House room to appeal. Trump has doubled down, claiming “More than $15 trillion” in investment depends on keeping tariffs intact. His rhetoric has fueled volatility, with investors weighing both the legal risks and the implications for Fed independence after his attempt to remove Governor Lisa Cook.
European Data Provides a Modest Cushion
Europe’s macro backdrop is mixed but slightly supportive for the euro. The Eurozone unemployment rate fell to 6.2% in July from 6.3%, reinforcing labor market stability. German inflation data surprised to the upside with HICP at 2.1% year-on-year, above 2% forecasts and the prior 1.8%. Manufacturing PMI for the bloc came at 50.7, higher than preliminary readings. These signals reduce pressure on the ECB to cut rates quickly, contrasting with the Fed’s dovish tilt. French political stress remains a drag: President Macron faces a confidence vote over his €44 billion budget package, and French 30-year yields surged to 4.46%, their highest since 2011, reviving worries about fiscal stability in the eurozone’s second-largest economy.
Technical Structure Suggests a Test of 1.1740–1.1830
Technically, EUR/USD trades above its 20-day EMA near 1.1662, keeping short-term momentum bullish. Resistance emerges at 1.1740, followed by 1.1785 and the July high at 1.1830. If bulls clear these levels, an extension toward 1.1900 is possible. On the downside, first support rests at 1.1695, then 1.1650, and finally 1.1610. The broader speculative range for September is framed between 1.1590 and 1.1850. RSI readings near 55 confirm moderate bullish bias, though intraday oscillators suggest short-term retracements cannot be ruled out.
Dollar Index Weakens as Fed Bets Intensify
The U.S. Dollar Index (DXY) has fallen to 97.55–97.70, down for four straight sessions. The decline reflects markets pricing Fed policy easing after core PCE rose 2.9% year-on-year, in line with forecasts but insufficient to prevent dovish repricing. Technicals show the DXY forming a descending triangle with support at 97.63, raising the risk of a slide toward 97.12 or even 96.74. This underpins euro demand, as institutional desks lean into the dollar selloff heading into U.S. labor data.
Labor Market Data Poses the Next Major Catalyst
Markets are focused on this week’s data avalanche: JOLTS, ADP, ISM services, and Friday’s Nonfarm Payrolls, expected at 78,000 jobs versus July’s 73,000. Unemployment is projected at 4.3%, a rise from 4.2%. A soft reading would likely fuel EUR/USD upside toward 1.1800, reinforcing Fed dovishness. A surprise beat, however, could see a correction back toward 1.1650. With CME futures showing nearly 90% odds of a September cut, the balance of risk suggests any downside will be capped, but intraday volatility will remain elevated.
EUR/USD Forecast Heading Into September
The euro-dollar cross enters September at 1.1710–1.1730, its highest levels in a week, holding a strong rebound from August’s low at 1.1575. The structure favors continued buying above 1.1650 with potential tests of 1.1740, 1.1785, and 1.1830 if data supports. A sustained move above 1.1830 would open the door to 1.1900, last seen in early summer. Conversely, a drop below 1.1650 would undermine bullish momentum and risk retests of 1.1610 or even 1.1528. Based on the balance of macro drivers, ECB stability, and Fed dovish tilt, EUR/USD remains tilted bullish, with traders favoring long setups into the September policy meetings.
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