Euro Slides Further as Dollar Gains Momentum Ahead of PCE Data and Jackson Hole

The euro slipped modestly against the dollar on Tuesday, pulling back from a four‑day peak of 1.1711 toward 1.1655 during European trade. Pressure on the EUR/USD pair stems from a stronger U.S. dollar as market participants await July’s Personal Consumption Expenditures (PCE) price index and the latest commentary from the Jackson Hole Symposium.

At the time of writing the U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, was up 0.1 points at around 99.07.

Market analysts note that while caution ahead of the upcoming releases has given the dollar a temporary lift, there is no sign of a broader trend shift for the currency.

USD upside seen near term even as broader trend stays under pressure

Scotiabank strategists point out that “calendar and event risk this week is significant,” suggesting the potential for moderate USD gains in the near term as investors trim positions. They caution, however, that the overall technical picture remains fragile, with “technical trends staying bearish and oscillator signals showing only a moderation in dollar weakness, no clear reversal yet apparent.”

Eurozone resilience underpins September ECB hike expectations

Nomura analysts maintain a September rate‑hike call for the European Central Bank, noting that “we expect the ECB to raise rates in September,” and that recent activity data could ease dovish concerns about overly restrictive policy. They cite the ECB’s Consumer Expectations Survey as a key medium‑term inflation indicator, observing that “in the July survey, despite the re‑escalation of the Iran conflict, three‑year ahead median inflation expectations continued to normalise, falling 0.1 percentage point to 2.7%, while five‑year ahead expectations stayed flat at 2.4%.”

EUR/USD Technical Analysis

EUR/USD is hovering near 1.1654, retaining a short‑term bullish bias as it stays above the 20‑day exponential moving average of 1.1577, indicating that buyers still hold the upper hand.

The 14‑period Relative Strength Index sits in solid positive territory around 67, pointing to strong yet not over‑extended upside momentum.

Support initially lies at the June 15 high of 1.1622, then the 20‑day EMA at 1.1577. To resume the uptrend, the pair must break decisively above the August peak of 1.1711. The next key resistance is the May high near 1.1800.

(This technical analysis was generated with AI assistance. Learn more.)

US Dollar FAQs

The United States Dollar (USD) serves as the official currency of the United States and is widely used as a de‑facto currency in many other economies. It dominates global foreign‑exchange markets, accounting for roughly 88 % of daily turnover—about $6.6 trillion in 2022 transactions. Historically, the USD replaced the British Pound as the world’s reserve currency after World War II and was backed by gold until the Bretton Woods system ended in 1971.

The most influential driver of the USD’s value is U.S. monetary policy, set by the Federal Reserve. The Fed’s dual mandate is price stability and maximum employment, primarily achieved through interest‑rate adjustments. When inflation exceeds the Fed’s 2 % target, rates are typically raised, strengthening the dollar; conversely, if inflation falls below target or unemployment rises, the Fed may cut rates, weakening the greenback.

In extreme circumstances, the Fed may resort to quantitative easing (QE), a non‑standard policy that expands credit availability. QE is employed when conventional rate cuts are insufficient, often during severe credit crunches such as the 2008 financial crisis. The Fed purchases large volumes of U.S. government bonds from financial institutions, injecting liquidity; this usually results in a weaker dollar.

Quantitative tightening (QT) is the opposite of QE. During QT, the Fed stops buying maturing bonds and refrains from reinvesting the proceeds, effectively reducing the money supply. This policy generally supports a stronger U.S. dollar.

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