EUR/USD Hits 1.1700 on Fed Pivot Hopes and Dollar Slide

EUR/USD Breaks Out Toward 1.1700 as Fed Rate Cut Bets Accelerate

EUR/USD has extended its bullish momentum, reaching 1.1700, the highest level since March 2022, driven by growing consensus around a September Fed rate cut, softening U.S. inflation data, and weakening dollar flows. The rally reflects both euro resilience and a meaningful repricing of U.S. policy expectations, as traders prepare for confirmation from this week’s CPI and PPI releases.

With the U.S. Dollar Index (DXY) slipping toward 102.40, dollar pressure is providing a tailwind across the G10 FX board — but EUR/USD remains the standout as bond yield spreads compress and short-dollar positioning accelerates.

Macro Momentum Shifts as CPI Cooldown Signals Fed Pivot

Markets are front-running a potential shift in Fed tone after recent data showed headline CPI at 2.7% YoY, below the Fed’s last projection. With core inflation falling, real yields are declining, and futures markets now price a 25bps rate cut in September with 96% probability, followed by another in December.

This is rapidly unwinding previous Fed hawkishness and weakening the dollar. As a result, EUR/USD’s breakout through 1.1620 resistance has triggered algorithmic buying and institutional flows, pushing the pair to 1.1700 with strong momentum.

Any downside CPI miss this week could supercharge a run toward 1.1800, while a surprise beat may stall the rally — but not yet reverse it.

Technical Structure Turns Bullish as EUR/USD Clears Multi-Month Ceiling

EUR/USD has decisively broken above the 1.1620–1.1650 resistance cluster, flipping a multi-month range into support. The daily RSI is climbing near 61, confirming bullish momentum, while MACD shows widening positive divergence — both indicating strength behind the breakout.

Key technical levels:

• Support: 1.1620 (former resistance), 1.1550 (21-day EMA), 1.1450 (100-day EMA)

• Resistance: 1.1760 (August 2022 high), 1.1805 (38.2% Fib retracement of 2021–2022 downtrend), 1.1900 (psychological zone)

As long as EUR/USD holds above 1.1620, the path of least resistance remains higher.

Fed–ECB Policy Divergence Reverses as Dollar Bulls Capitulate

For over a year, monetary divergence favored the dollar — but that edge is now gone. With U.S. growth cooling and the ECB keeping rates steady while inflation slows slowly, the differential in expected policy rates is shrinking.

Markets no longer expect further hikes from the European Central Bank, but also no cuts until 2026. This gives the euro a passive advantage, as the Fed is now expected to act sooner and deeper.

Combined with bond yield convergence — with 10Y U.S. Treasuries at 4.06% and German Bunds at 2.63% — the flow dynamic is shifting back in favor of EUR/USD.

U.S. Data Calendar Holds the Key to 1.18 Breakout

The next wave of directional movement hinges on the following:

• Wednesday: U.S. CPI – consensus 0.2% MoM

• Thursday: U.S. PPI – expected 0.1% MoM

• Friday: UMich Sentiment & 1-Year Inflation Expectations

• Ongoing: Fed officials’ speeches including Powell, Jefferson, Goolsbee

If data continues to underwhelm, EUR/USD could reclaim 1.1760 and even 1.1805, where heavy technical and psychological resistance lies. A short-term consolidation above 1.1650 would set the base for such a move.

Eurozone Macro Remains Fragile, But Not Weak Enough to Stop the Rally

Even as Germany's Ifo Business Index weakens and Eurozone PMIs flirt with contraction, capital continues to flow into euro assets. Why? Because U.S. policy expectations are deteriorating faster.

As long as the eurozone remains stable, and the Fed continues to soften its tone, EUR/USD is unlikely to see sustained downside. That said, poor German data or geopolitical shocks (e.g., escalation in Ukraine or instability in France) could trigger sharp but likely temporary drawdowns.

Buy/Sell/Hold Verdict: BUY — Targeting 1.1805 Next

EUR/USD’s breakout to 1.1700 is technically confirmed, macro-supported, and structurally clean.

• Buy on dips above 1.1620 → Target 1.1760 / 1.1805 / 1.1900

• Hold if range-bound between 1.1620–1.1700

• Sell only if below 1.1550 with bearish CPI surprise

Current rating: BUY, with medium-term upside toward 1.1805–1.1900, assuming macro tailwinds hold and Fed dovish pricing remains intact.

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