EUR/USD at Highest Level Since May: What Comes Next?

Market impact: Moderately bullish EUR/USD, but vulnerable to a data-driven reversal.

The move toward 1.1700–1.1710 extends the euro’s recent appreciation and reflects a favorable relative-growth and relative-policy narrative: improving euro-area activity supports the EUR, while the reported expansion of the US Treasury’s bond-buyback program is being interpreted as negative for the dollar. The buyback effect is indirect, however; its currency impact depends primarily on how it changes Treasury yields, term premium, liquidity conditions, and expectations for US fiscal and monetary policy.

The fundamental bias remains constructive for EUR/USD if incoming US figures soften. The key risk is the cluster of US releases on Wednesday, August 26, 2026—core PCE, the second estimate of second-quarter GDP, durable-goods orders, and personal income and spending—followed by the preliminary annual payrolls revision on Friday, August 28, 2026. Weaker US inflation or growth would reinforce expectations for easier Federal Reserve policy and could extend dollar selling. Conversely, firm core PCE or resilient activity would challenge the current valuation and encourage profit-taking in EUR/USD.

For the euro, the upside is not unambiguously strong. Euro-area business activity and German industry have improved, but the slight decline in one-year inflation expectations to 2.9% from 3.0% reduces immediate pressure for additional ECB tightening. This creates a mixed policy signal: better activity supports the euro, while moderating inflation expectations may limit how far euro-area yields can rise relative to US yields.

Technically, the article presents a two-sided setup rather than a confirmed trend continuation. A sustained break above the current consolidation could expose 1.1811, but the source also anticipates a possible retracement toward 1.1581. A downside break would shift focus to 1.1455, with possible extension toward 1.1400. Short-term momentum is considered stretched, with the H1 stochastic above 80 and turning lower, while the H4 MACD still reflects bearish momentum—raising the risk of a pullback even if the broader EUR/USD bias remains positive.

Trading interpretation:

the immediate bias is bullish EUR/USD, but continuation likely requires confirmation from weaker US data or lower US yields. A failure to hold the breakout zone, especially alongside stronger US inflation or payrolls information, would suggest that the move is primarily dollar-positioning and could unwind quickly.

Monitor next:

• Germany’s Ifo business climate index on Tuesday, August 25.
• US core PCE, GDP, durable goods, and income/spending data on August 26.
• The US payrolls benchmark revision on August 28.
• US–German yield differentials and Treasury-market reaction to the buyback program.
• Whether EUR/USD can sustain trade above the recent 1.1700–1.1710 area rather than merely spike through it.