EUR/USD price rebounds as policy divergence lifts sentiment and structure
The euro is gaining ground against the U.S. dollar in August, with EUR/USD trading near 1.1690 as investors bet on the Federal Reserve initiating the rate-cut cycle ahead of the European Central Bank. The rebound follows a sharp recovery from July’s low of 1.1390, driven by disappointing U.S. jobs data and increased expectations of a September Fed cut.
Highlights
- EUR/USD trades near 1.1690 after rebounding from July’s 1.1390 low, reclaiming key bullish channel
- Markets now price in an 80% chance of a Fed cut by September versus 60% for an ECB move by year-end
- RSI climbs above 55 while EMAs turn supportive, signaling a bullish shift in short-term euro momentum
Meanwhile, the ECB is expected to move more cautiously, reinforcing the euro’s relative strength in recent sessions. On the daily chart, EUR/USD has re-entered the ascending parallel channel that defined its March-to-June rally. The pair found strong support between 1.1385 and 1.1450 before reversing higher. A decisive close above 1.17 would confirm a full trend resumption. Price action is now trading above the 20-day EMA at 1.1618 and testing the 50-day EMA at 1.1559. These levels, which previously acted as dynamic resistance, now offer potential support, highlighting renewed bullish control.
EUR/USD price dynamics (Source: TradingView)
The 100-day EMA at 1.1385 served as a critical floor during the late July selloff, while the 200-day EMA near 1.1164 continues to offer a longer-term cushion. Momentum has also shifted in favor of bulls, with the RSI rising to 55.76 and showing a bullish divergence to the July lows, signaling that upside momentum is returning to the pair.
Monetary divergence drives euro higher, with resistance ahead
While technicals favor further gains, macro divergence remains the dominant narrative. Market pricing reflects an 80% chance of a Fed rate cut by September, while only a 60% probability is assigned to an ECB cut by year-end. Immediate resistance lies between 1.1730 and 1.1770, a zone that previously capped upside attempts in late June. A clean breakout above this band could pave the way toward 1.19 and possibly 1.21 in the coming months.
Traders will closely monitor upcoming eurozone inflation figures and ECB rhetoric for signs of a shift. Meanwhile, external risks such as evolving U.S. trade policies could weigh on sentiment. Until then, the euro continues to leverage technical momentum and policy divergence to sustain its rebound.
In earlier coverage, we highlighted EUR/USD’s struggle to hold the channel support near 1.1450 and the looming risk of deeper downside toward 1.13. However, the current recovery and reclaimed EMAs now realign the pair with its earlier bullish structure.
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