The EURUSD pair is currently trading near two-month highs as the greenback keeps losing its shine. The key driver over the past week has been a marked shift in expectations surrounding the Federal Reserve's (Fed) monetary stance. A cascade of weak US economic data—from lackluster employment figures to subdued inflation readings—has convinced investors that the regulator is unlikely to pull the trigger on a September interest rate hike. The probability has plunged to roughly 31%, a steep drop from 50%+ just seven days ago. As a result, the dollar index (DXY) has slid to multi‑month lows, giving the single currency room to grow.
On the eurozone front, the mood is brightening. Germany's ZEW economic expectations index climbed to 34.2 in August, up from 26.3 the previous month and well above consensus forecasts. The pickup was fueled by a rebound in export orders, solid corporate earnings, and the ripple effects of new infrastructure spending. Although high energy prices and transportation bottlenecks remain a headache, data suggest that the worst may be behind Europe's largest economy.
At the same time, the market is pricing in another ECB rate hike in September with near certainty. According to a Reuters poll, 83% of economists anticipate a 25-basis-point move. This steadily narrows the interest rate differential between the United States and the eurozone, further tipping the scales in favor of the single currency.
Technically, EURUSD has broken above the 1.15000 resistance and is now eyeing further upside. With both the Relative Strength Index (RSI) and the Moving Average Convergence/Divergence (MACD) Indicator pointing north, the pair looks poised to challenge 1.18000 in the sessions ahead.
The ultimate recommendation is to buy EURUSD at the current price (1.15850), targeting 1.18000 within one month. To protect your position if the market moves against us, place a Stop Loss order at 1.15000.
This content is for informational purposes only and is not intended to be investing advice.
