EUR/USD Tests Key Barrier at 1.1174 Ahead of Jackson Hole - Breakout in the Cards?

• The EUR/USD pair has surged to its highest level in over a year.
• The market is now focused on Jerome Powell's upcoming speech alongside some key economic data from the US.
• In this piece, we'll take a look at the technical picture for the pair ahead of key events.
• For less than $8 a month, InvestingPro's Fair Value tool helps you find which stocks to hold and which to dump at the click of a button.

The euro has gained momentum against the US dollar, driven by growing expectations of an interest rate cut in September, with the size of the cut still in question.

As a result, the EUR/USD pair has risen to its highest level in over a year, hitting the 1.1174 level recently.

This week’s economic data from the Eurozone presented a mixed picture: while services PMI exceeded expectations, weaker data from Germany and France dampened the overall outlook.

Despite the data, the euro’s upward trend has continued to persist.

The market now turns its attention to Jerome Powell’s upcoming speech at the Jackson Hole Symposium. Investors are keen to hear his insights on the Fed’s future monetary policy, with a dovish tone potentially boosting the euro further.

With that in mind, let's take a look at the technical situation in the EUR/USD pair and examine what it might take for the pair to continue surging above the annual highs.

EUR/USD at a Critical Juncture

The EUR/USD pair recently climbed to 1.1174, reaching its highest level against the dollar in the past year. In August, EUR/USD surged sharply upward, while the DXY index dropped to the 101 range due to a downtrend this week.

Despite a quiet week for Eurozone data, regional services and manufacturing reports impacted the pair.

August’s PMI data exceeded expectations, supporting the EUR/USD pair. However, PMI figures from Germany and France, which showed a deeper contraction in manufacturing, caused the euro to slip slightly towards the 1.112 level.

EUR/USD

Technically, EUR/USD reversed its downward trend earlier this month and reached a yearly peak this week. A key point now is whether it can close above 1.114, the peak recorded at the end of last year.

If EUR/USD closes above 1.114 daily over the next week, the trend could extend towards 1.128 (Fib 1.272). Beyond this target, medium-term goals for EUR/USD are 1.1360 and 1.147.

On the downside, failing to hold above 1.114 could lead to a retracement towards 1.1025-1.1070. The EUR/USD outlook for the rest of the year will likely be influenced by US economic developments.

A dovish statement from Jerome Powell tomorrow could support the euro and help it stay above 1.14. Conversely, a surprise hawkish tone from Powell might intensify market volatility.

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