EUR/USD Correction May Be Nearing an End

Summary:

The eurozone faces an internal dilemma marked by "rising unemployment in Germany and stagnation in France," which, combined with external policy shocks, forms a triple pressure point. The preliminary August CPI data for the eurozone, released on September 1, will directly influence market bets on rate cuts ahead of the ECB’s September policy meeting.

Buy EURUSD

EXP

Trading

1.15747

ENTRY

1.16360

TGT

1.15364

1.15784 -0.00128 -0.11%

Point

Flat

1.15364

CLOSING

1.15747

ENTRY

1.16360

TGT

Fundamentals

Following today's open, EUR/USD was dragged lower under the dual strain of US-Europe policy divergence and macroeconomic data releases. The most notable fundamental shift stems from heightened tension between the Federal Reserve and the ECB following the Jackson Hole symposium. Deeper market anxiety centres on whether the Trump administration might extend political interference to USD swap lines—a bedrock of global financial stability. Although Fed Chair Kevin Warsh made every effort to reassure the market, policy uncertainty from the executive branch continues to unsettle investors.

On the US front, economic data presents a mixed picture. The ISM Manufacturing PMI released on September 1 has taken center stage, with investors closely monitoring New Orders and Prices Paid sub-indexes to gauge the real economy's resilience under sustained high interest rates. Meanwhile, all three major US stock indexes posted losses, with the Dow Jones dropping 0.70%. Tech giants diverged, with Amazon falling due to an FTC lawsuit, highlighting market sensitivity toward regulatory risks and inflation concerns. Furthermore, escalating Middle East tensions drove oil prices sharply higher, with WTI crude advancing 2.8%, worsening imported inflation pressures in the US and potentially narrowing the Fed's scope for monetary easing.

The eurozone, on the other hand, faces an internal dilemma characterized by "rising unemployment in Germany and economic stagnation in France." Paired with external policy shocks, this environment creates a triple pressure point on the currency. The preliminary August CPI report released on September 1 will directly shape rate-cut expectations ahead of the ECB's September policy meeting.

Technical Analysis

On the 4-hour chart, EUR/USD is currently undergoing a pullback within a broader medium-to-long-term uptrend. After retreating from recent highs, price action is testing support near the upper boundary of the Vegas Tunnel system, showing early signs of stabilizing. Key downside support rests near 1.1583 at the upper boundary of the inner tunnel (EMA 144/169); a breakdown below this zone could lead to a retest of the strong support band between 1.1549 and 1.1551, where the outer tunnel (EMA 288/338) resides. Key upside resistance stands near 1.1650; reclaiming and holding above this level would pave the way for a renewed rally toward the previous high of 1.1710. While EUR/USD previously broke out of its horizontal consolidation range, the current pullback has been sizeable, requiring further observation to determine whether price action can establish solid support within the inner tunnel.

Within the dual-tunnel framework, EMA 144 (1.15830) and EMA 169 (1.15733) remain in a bullish alignment above the slower outer tunnel, with both benchmark moving averages maintaining clear upward slopes—confirming that the pair's medium-to-long-term bullish trend remains solid. Although the current candlestick at 1.15926 has pulled back sharply from recent highs and pierced the upper line of the inner tunnel, pointing to strong short-term corrective pressure, both the EMA 144/169 and EMA 288/338 tunnels continue to expand upward. This offers substantial technical support, suggesting EUR/USD may complete a shakeout phase within the 1.1550–1.1583 zone before resuming its primary uptrend. EUR/USD Correction May Be Nearing an End_1

EUR/USD Correction May Be Nearing an End_1

Trading Recommendations

Direction: Long

Entry: 1.15750

Take Profit: 1.16360

Stop Loss: 1.15364

Support: 1.15750 / 1.15276 / 1.14730

Resistance: 1.16360 / 1.17370 / 1.17884

Risk Warnings and Investment Disclaimers

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Eva Chen

Analysts

Master of Economics, 8 years in the financial industry, CFA holder, joined HSBC (Hong Kong) Bank in 2013 after graduating from the University of California, USA in the Investment Research and Markets Department. With years of financial market experience and trading experience, having provided excellent investment advice to many brokerages, entity derivatives importers and clients in Greater China.

Rank

Articless

2734

Win Rate

60.59%

P/L Ratio

0.67

Focus on

XAUUSD, WTI, GBPUSD

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EUR/USD Correction May Be Nearing an End

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