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EUR/USD Market Outlook — August 5, 2026
EUR/USD has maintained strong upward momentum over the past several weeks, with buyers driving the pair to a recent high of 1.15559.
Fundamental Outlook for the U.S. Dollar
The U.S. Dollar Index came under considerable selling pressure last week and recorded a notable decline.
The recent drop in oil prices, lower U.S. Treasury yields, and growing expectations of a potential de-escalation in tensions between the United States and Iran have reduced safe-haven demand for the dollar, generating moderate downside pressure in the near term.
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Lower oil prices are also weighing on the dollar by easing inflation expectations, reducing the likelihood of further interest-rate hikes, and placing downward pressure on Treasury yields, particularly at the short end of the yield curve.
Nevertheless, the hawkish stance maintained by several Federal Reserve officials indicates that inflation remains a significant concern. As a result, the possibility of interest rates remaining elevated for longer—or of monetary policy becoming even more restrictive—has not been fully ruled out. This continues to limit the potential for a sustained and one-sided decline in the dollar.
In Asian markets, coordinated support for the Japanese yen from the United States and Japan has placed direct downward pressure on USD/JPY. The 157.00–158.00 range has now emerged as an important post-intervention consolidation zone.
However, the likelihood of renewed intervention would increase if the dollar were to rebound rapidly towards its recent highs, particularly within the 160.00–164.00 region. The impact of any intervention would likely prove more sustainable if accompanied by lower U.S. Treasury yields or a more restrictive monetary-policy stance from the Bank of Japan.
Fundamental Summary
The fundamental outlook for the U.S. dollar is currently neutral with a moderate bearish bias. However, this scenario remains relatively fragile and highly sensitive to incoming economic and geopolitical developments.
A continued decline in Treasury yields, weaker expectations of further rate hikes, and an easing of geopolitical tensions in the Middle East could place additional pressure on the dollar.
Conversely, stronger-than-expected employment data, persistently elevated core inflation, a recovery in oil prices, or a more hawkish tone from the Federal Reserve could support a swift rebound in the U.S. currency.
EUR/USD Price Action Analysis
On the higher timeframes, particularly the weekly chart, the break above the key 1.14700 level has strengthened the bullish outlook. The bullish cycle indicated by the Stochastic Oscillator (8, 3, 3) also supports the possibility of further upside.
As long as the key 1.14700 level remains intact, the pair retains the potential to extend its advance. Buyers are likely to target the 1.16000 resistance level initially, with a stronger bullish move potentially opening the way towards 1.16700.
Under the alternative bearish scenario, the first warning sign would be a decisive break below the key 1.14700 support level.
Should four-hour candles close and consolidate below this level, the bullish outlook would weaken, increasing the likelihood of a decline towards the important support levels at 1.14400 and 1.14200.
EUR/USD has maintained strong upward momentum over the past several weeks, with buyers driving the pair to a recent high of 1.15559.
Fundamental Outlook for the U.S. Dollar
The U.S. Dollar Index came under considerable selling pressure last week and recorded a notable decline.
The recent drop in oil prices, lower U.S. Treasury yields, and growing expectations of a potential de-escalation in tensions between the United States and Iran have reduced safe-haven demand for the dollar, generating moderate downside pressure in the near term.
Get Trading on Deriv - Click Here to Read Deriv Broker Forex Platforms Review.
Lower oil prices are also weighing on the dollar by easing inflation expectations, reducing the likelihood of further interest-rate hikes, and placing downward pressure on Treasury yields, particularly at the short end of the yield curve.
Nevertheless, the hawkish stance maintained by several Federal Reserve officials indicates that inflation remains a significant concern. As a result, the possibility of interest rates remaining elevated for longer—or of monetary policy becoming even more restrictive—has not been fully ruled out. This continues to limit the potential for a sustained and one-sided decline in the dollar.
In Asian markets, coordinated support for the Japanese yen from the United States and Japan has placed direct downward pressure on USD/JPY. The 157.00–158.00 range has now emerged as an important post-intervention consolidation zone.
However, the likelihood of renewed intervention would increase if the dollar were to rebound rapidly towards its recent highs, particularly within the 160.00–164.00 region. The impact of any intervention would likely prove more sustainable if accompanied by lower U.S. Treasury yields or a more restrictive monetary-policy stance from the Bank of Japan.
Fundamental Summary
The fundamental outlook for the U.S. dollar is currently neutral with a moderate bearish bias. However, this scenario remains relatively fragile and highly sensitive to incoming economic and geopolitical developments.
A continued decline in Treasury yields, weaker expectations of further rate hikes, and an easing of geopolitical tensions in the Middle East could place additional pressure on the dollar.
Conversely, stronger-than-expected employment data, persistently elevated core inflation, a recovery in oil prices, or a more hawkish tone from the Federal Reserve could support a swift rebound in the U.S. currency.
EUR/USD Price Action Analysis
On the higher timeframes, particularly the weekly chart, the break above the key 1.14700 level has strengthened the bullish outlook. The bullish cycle indicated by the Stochastic Oscillator (8, 3, 3) also supports the possibility of further upside.
As long as the key 1.14700 level remains intact, the pair retains the potential to extend its advance. Buyers are likely to target the 1.16000 resistance level initially, with a stronger bullish move potentially opening the way towards 1.16700.
Under the alternative bearish scenario, the first warning sign would be a decisive break below the key 1.14700 support level.
Should four-hour candles close and consolidate below this level, the bullish outlook would weaken, increasing the likelihood of a decline towards the important support levels at 1.14400 and 1.14200.