EUR/USD Forecast: 1.1600 Caps Gains as Dollar Weakness Tests Bulls

EUR/USD forecast: The euro tests 1.1600 after reaching 1.1614 as Fed hike bets fall. See key support, resistance and targets for the next move.

EUR/USD struggled to hold gains on Monday after climbing to 1.1614, its highest level in roughly two months. The pair later retreated below 1.1600 and approached 1.1561, showing that sellers remain active near a key resistance zone. The move came as the U.S. dollar weakened broadly after softer U.S. economic data reduced expectations for another Federal Reserve rate increase. The European Central Bank’s reference rate for Aug. 17 was $1.1593 per euro, up 0.2% from the previous session.

EUR/USD Tests 1.1600 Resistance

The broader technical structure has improved after EUR/USD broke above a six-month descending resistance trendline. That move shifted the pair away from its previous bearish bias and into a more neutral range. However, the recovery still needs confirmation because price has struggled to establish a sustained position above 1.1600.

The 100-day simple moving average near 1.1568 is an important short-term reference. A sustained break above 1.1600 would put 1.1629, where the 200-day SMA is located, into focus. Beyond that level, resistance appears around 1.1650 and then 1.1700.

The latest price action shows why 1.1600 matters. EUR/USD reached 1.1614 on Monday before reversing lower, while Reuters reported that the euro had climbed to a two-month high as traders reduced expectations for a September Fed rate increase.

Dollar Weakness Supports the Euro

The euro’s recent strength has been closely linked to changing expectations for U.S. monetary policy. Weak July retail sales, job losses and relatively mild inflation have caused markets to reduce the probability of another Fed hike. Reuters reported that September hike expectations fell to about 30.6% on Monday from 52.2% a week earlier.

The dollar remains vulnerable if incoming U.S. data continue to weaken the case for tighter monetary policy. The Federal Reserve has held its policy rate at 3.5%-3.75% since July, while markets are also watching the Jackson Hole symposium for further signals on the interest-rate outlook.

Important levels for traders include:

• 1.1600: Immediate resistance and breakout trigger
• 1.1629: 200-day SMA and next major barrier
• 1.1500: Key support for the broader structure
• 1.1466: 50-day SMA and former trendline support

1.1500 Defines the Bearish Risk

A sustained move above 1.1600 would strengthen the bullish case and expose 1.1629, 1.1650 and potentially 1.1700. However, another rejection at this level would leave the pair vulnerable to a deeper correction.

The first major downside threshold is 1.1500. A decisive break below it would weaken the neutral technical structure and shift attention toward the 50-day SMA at 1.1466. That level also coincides with the former descending resistance trendline, increasing its technical importance. A break below 1.1466 could expose 1.1400.

Momentum remains constructive, but the RSI has flattened, suggesting that buying pressure is no longer accelerating. That makes confirmation more important than the intraday move alone.

Conclusion:

EUR/USD remains supported by a weaker U.S. dollar and reduced Fed rate-hike expectations, but 1.1600 remains the decisive technical barrier. A daily close above it would strengthen the recovery toward 1.1629 and 1.1650. Failure to hold above 1.1600, followed by a break under 1.1500, would instead increase the risk of a move toward 1.1466 and 1.1400.