Go long on EURUSD as Fed rate hike expectations in September fade

In mid-August, the EURUSD pair continues to hold its upside potential, buoyed by a softening dollar and steady adjustments to expectations regarding the policies of major central banks. Last week's narrative was dominated by a series of lackluster US data releases. The July jobs report revealed a 23,000-person contraction in payrolls, while inflation and producer price readings offered little evidence of renewed pressures. Not surprisingly, the odds of a Federal Reserve (Fed) interest rate hike in September tumbled to around 33% by the week's end—down sharply from 44% just seven days earlier. Adding insult to injury for the greenback, American retail sales unexpectedly shrank in July, stoking fears of a new slowdown in consumer spending.

On the euro side, the story takes a more constructive turn. Despite the bloc's lingering vulnerabilities, inflation surged to 2.9% in July—well above the European Central Bank's (ECB) 2% target. Energy prices are still the main engine behind this persistence. As a result, the market has all but priced in another rate hike, with 83% of economists polled by Reuters anticipating a 25‑basis‑point move in September.

The monetary gap between these two regulators is slowly turning in favor of the single currency. While the Fed is confronting mounting evidence of a cooling economy and labor market, the ECB remains laser-focused on inflation and is prepared to keep tightening until the job is done.

The final recommendation:

— Buy the EURUSD pair at the current price (1.15850), aiming to reach 1.17000 within a couple of weeks.

— To shield your position from adverse market movements, place a Stop Loss order at 1.15000.