EUR/USD Outlook: Dollar Weakness Persists Ahead of Jackson Hole Test

The euro has recouped recent losses against the U.S. dollar, pushing EUR/USD toward the 1.17 handle as broad-based greenback weakness continues to drive foreign-exchange markets. The shift hinges on evolving monetary-policy expectations, with traders assessing whether the Federal Reserve can sustain a restrictive posture while U.S. economic momentum shows signs of fading.

A pivotal test arrives this week when Fed Chair Kevin Warsh delivers his first Jackson Hole address on Friday. Sticky inflation and climbing long-term Treasury yields may prompt a hawkish tone, especially if Warsh suggests September rate cuts are not assured. Conversely, evidence of softer growth or cooling price pressures would reinforce easing bets and likely extend the dollar’s slide.

Across the Atlantic, euro-area inflation accelerated to 2.9% in July, keeping price pressures above the European Central Bank’s 2% target. The ECB has held rates steady since June, but elevated energy costs and renewed inflation risks may constrain the scope for further policy easing.

With EUR/USD hovering near multi-month peaks, the Jackson Hole symposium and upcoming U.S. PCE inflation data will likely determine whether the euro can sustain its advance or if a hawkish Fed response sparks a dollar recovery.

Technical Analysis of EUR/USD

The daily chart shows EUR/USD has decisively cleared the descending trendline that capped rallies since the February highs, signaling a meaningful shift in medium-term structure.

The pair now trades around 1.1665, comfortably above both the 100-period EMA at 1.1546 and the 0.382 Fibonacci retracement at 1.1579. The breakout has also lifted price clear of the 1.1537–1.1495 support band, leaving the 1.1714 Fibonacci resistance as the next significant hurdle.

Bullish Scenario

If buyers defend the 1.1579 Fibonacci level and the 100-period EMA, the constructive structure remains intact.

A close above 1.1714 would target the 1.1775–1.1800 resistance zone, where previous advances have repeatedly stalled. A sustained break above this region would bolster the case for a broader recovery and suggest the longer-term downtrend has been decisively reversed.

Bearish Scenario

Conversely, rejection at 1.1714 followed by a break below 1.1579 would undermine the current setup, exposing the 100-period EMA near 1.1546—closely aligned with the 0.5 Fibonacci level at 1.1537.

A deeper decline through this confluence would bring the 0.618 retracement at 1.1495 into focus, followed by 1.1435 and the 0.786 Fibonacci level as subsequent downside targets.

As EUR/USD tests major Fibonacci resistance after breaking its descending trendline, the key question is whether buyers can convert the breakout into a sustained push toward 1.1800, or if resistance will again force a retreat toward the critical support zone.

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