EUR/USD at highest level since may: What comes next?

Market impact: moderately bullish EUR/USD, but vulnerable to a near-term pullback.

The move toward 1.1700 reflects a combination of softer-dollar positioning and improved euro-area activity rather than a decisive change in long-term fundamentals. The reported expansion in eurozone business activity, especially in Germany’s industrial sector, supports the euro through better growth expectations. Slightly lower one-year inflation expectations, however, reduce the urgency for aggressive ECB tightening, making the policy support for EUR/USD less straightforward.

The more important driver for the pair is likely the US-dollar side. The US Treasury’s expanded bond-buyback program appears to have weakened the dollar by altering expectations around Treasury-market liquidity and term-premium dynamics. That effect could persist if it reinforces a broader perception of easier financial conditions, but it may reverse if US yields rise or investors interpret the buybacks as insufficient to address Treasury-market concerns.

The main near-term catalyst is the US data sequence on Wednesday, August 26, 2026, particularly core PCE inflation, the second estimate of second-quarter GDP, durable-goods orders, and personal income and spending. Soft inflation combined with weaker activity would strengthen expectations for a less restrictive Federal Reserve and could extend EUR/USD upside. Conversely, firm core PCE or resilient spending and growth would revive US-rate support and expose the pair to profit-taking. The preliminary annual payroll revision due Friday, August 28, 2026 adds an additional risk of sharp dollar repricing.

Technically, the article’s setup is mixed: EUR/USD is testing the upper end of its recent range, so a clean break above the cited 1.1700–1.1710 area would signal continuation potential toward approximately 1.1811. Failure to sustain the breakout would favor a retreat toward the 1.1622–1.1611 region, while a broader downside break could bring the lower levels identified by the source into focus. These are scenario markers, not confirmed targets, and the momentum indicators described by the article warn that short-term upside may be overextended.

Trading implication:

the bias remains modestly EUR/USD-positive while European data hold up and US data disappoint, but the pair’s elevated level makes it highly sensitive to US yields, core PCE, payroll revisions, and any renewed dollar-safe-haven demand. The key question is whether the move represents a genuine repricing of the US–eurozone policy differential or merely a dollar pullback ahead of high-impact data.