The EUR/USD pair eased back to around 1.1650 on Thursday, retreating slightly from its monthly peak of 1.1710. The move came as markets digested the latest batch of US economic figures, while investors increasingly turned their attention to the upcoming Jackson Hole Symposium.
The retreat came after the latest US GDP and PCE figures, while investors waited for a key statement from Federal Reserve Chair Kevin Warsh. Discover a more detailed perspective on this topic from Praxes Group’s brokers in the full article.
The latest report showed that core PCE inflation rose 3.3% in July, while headline PCE inflation increased 3.7%. Both measures have remained above the Federal Reserve’s 2% target, highlighting continued inflationary pressure and creating uncertainty about the future path of US interest rates.
For EUR/USD, the inflation figures are important because expectations for Federal Reserve monetary policy strongly influence the US dollar. If traders expect interest rates to remain high, the dollar could strengthen as investors seek higher returns from US assets. Conversely, expectations of lower rates could weaken the greenback and support the euro.
Jackson Hole Summit Ahead
The Jackson Hole Economic Policy Symposium has become the main catalyst for financial markets. Traders will closely examine Warsh’s statement for clues about the Fed’s approach to inflation, interest rates and economic growth.
His statement comes at an important time, with inflation still above the 2% target and cracks emerging in the US bond market. The 30-year Treasury yield has been hovering at its highest level in two decades.
The sharp rise in long-term yields has increased borrowing costs and raised concerns about financial-market stability. The surge also pushed the US Treasury Department to intervene last week.
Market participants remain divided over what the Federal Reserve will do for the remainder of the year. Some believe persistent inflation means the Fed may need to raise interest rates, while others expect policymakers to leave rates unchanged.
A hawkish Warsh statement could strengthen the dollar by increasing expectations for tighter monetary policy. Higher Treasury yields could reinforce that move and put additional pressure on EUR/USD.
However, a dovish statement could weaken the dollar. If Warsh focuses on economic risks or indicates that rates can remain unchanged, traders could increase expectations for a softer policy outlook, potentially allowing EUR/USD to resume its advance.
Energy Prices Keep Inflation Under Pressure
Energy prices are also complicating the inflation outlook. Although Brent crude and WTI fell this week, gasoline remains above $4 and diesel prices are near record highs.
High fuel costs can fuel broader inflation through higher transportation and business expenses, continuing to pressure consumers and companies despite lower crude prices.
Europe faces similar challenges, with rising diesel and natural gas prices, the latter at its highest since 2023. This could keep inflation above the ECB’s 2% target.
As a result, some expect the ECB to raise rates this year if inflation stays elevated, potentially supporting the euro and counterbalancing the Federal Reserve’s policy outlook.
EUR/USD Technical Analysis
From a technical perspective, EUR/USD has wavered in recent days as traders wait for Warsh’s Jackson Hole statement. The pair pulled back from 1.1710 to 1.1650, reflecting selling pressure after its recent advance.
The retreat occurred after the pair formed two shooting-star candles. This pattern can signal selling pressure near resistance and suggests that buyers struggled to maintain momentum around the 1.1700–1.1710 area.
Despite the pullback, the broader technical structure remains bullish. EUR/USD is trading slightly above the crucial 1.1620 support level, which was its highest point on June 16. Holding this level would help preserve the bullish structure, while a sustained break below it could signal a deeper correction.
The pair has also formed a bullish flag pattern, which is generally considered a continuation signal in technical analysis. The formation suggests that the recent decline could represent consolidation before another upward move.
EUR/USD Outlook
The technical setup suggests that EUR/USD could eventually stage a bullish breakout. If buyers regain control and push the pair above 1.1710, the move would strengthen the bullish outlook and potentially open the way toward 1.1800.
Conversely, a decisive break below 1.1620 would weaken the bullish setup and could trigger additional selling pressure.
For now, traders are focused on Jackson Hole, US inflation, Treasury yields and the future direction of Federal Reserve policy. At the same time, Europe’s rising energy costs and potential ECB tightening remain important factors for the euro.
The key technical levels are therefore 1.1620 on the downside and 1.1710 on the upside. A break below support would weaken the bullish structure, while a move above resistance could confirm renewed upside momentum and potentially send EUR/USD toward 1.1800.