EUR/USD forecast: Technical Tuesday | August 25, 2026

EUR/USD: Near-term bias is mildly bearish, but conviction should remain low.

The combination of calm energy and bond markets, a stable risk backdrop, and a slightly firmer U.S. dollar reduces the immediate demand for euros against the dollar. With no panic response to the Iran-related escalation, safe-haven flows into USD appear limited but still marginally supportive, while the positive equity tone suggests markets are not pricing an acute geopolitical shock.

The more important driver is the event risk ahead. U.S. inflation data on Wednesday could materially shift expectations for Federal Reserve policy through Treasury yields and the dollar. A hotter-than-expected reading would likely reinforce the USD side of EUR/USD by pushing rate expectations and yields higher; a softer reading could quickly unwind the current dollar advantage and trigger a rebound in the pair. The market may therefore remain range-bound or technically driven until the data release.

Kevin Warsh’s Jackson Hole speech on Friday adds a second source of two-way risk. Any indication that policy should remain restrictive, or that inflation risks are being underestimated, would be dollar-positive. Conversely, comments favoring eventual easing or expressing concern about growth could pressure the dollar and support EUR/USD. Because the speech follows the inflation report, its impact will depend heavily on whether it confirms or challenges the market’s interpretation of the data.

For traders, the immediate setup is less about a strong fundamental trend and more about positioning ahead of high-volatility catalysts. A technical downside bias in EUR/USD could persist while U.S. yields and the dollar remain firm, but that view is vulnerable to a soft inflation surprise. The main risks to the bearish interpretation are weaker U.S. data, dovish policy guidance, renewed geopolitical stress that damages U.S. assets rather than supporting the dollar, or a sharp reversal in Treasury yields.

Monitor U.S. inflation, two-year Treasury yields, dollar broad-based performance, and the tone of Warsh’s remarks. Until those catalysts arrive, follow-through in either direction may be limited and false technical breaks remain a significant risk.