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Euro Extends Gains as Dovish Fed Signals Weigh on Dollar, Investors Eye GDP Data
Traders' Opinions
Summary:
The euro extended its recovery against the U.S. dollar on Thursday, buoyed by dovish Federal Reserve commentary and political drama in Washington, even as weak Eurozone data capped upside momentum.
Buy
CLOSEDEURUSD
End Time
1.16650
Entry Price
1.17500
TP
1.15700
SL
1.16825 +0.00008 +0.01%
162
Points
Profit
1.15700
SL
1.16812
CLOSING
1.16650
Entry Price
1.17500
TP
The euro rose further against the U.S. dollar on Thursday, with the EUR/USD pair climbing from a weekly low near 1.1575 to touch an intraday high around 1.1670 as investors positioned themselves ahead of key U.S. economic data. The move came as dovish comments from a senior Federal Reserve official and renewed political drama in Washington undermined confidence in the greenback, tilting market sentiment in favor of the common currency despite lackluster Eurozone data.
The recovery gained traction late Wednesday after New York Fed President John Williams struck a notably accommodative tone in remarks to CNBC. Williams suggested that interest rates are likely to move lower over time, emphasizing that every monetary policy meeting remains “live” and that officials will remain data-dependent. His language fueled speculation that the Fed could deliver an interest rate cut as early as September—a prospect that sent U.S. Treasury yields lower and pressured the dollar across major currency pairs.
The dollar’s weakness was further compounded by President Donald Trump’s renewed confrontations with the Fed. Earlier this week, Trump attempted to dismiss Governor Lisa Cook, reportedly to pave the way for a more dovish policymaker aligned with his pro-growth agenda. While the move is unlikely to succeed in practice, it reinforced concerns about political interference at the central bank and dented the perception of Fed independence—an institutional cornerstone closely watched by investors.
The euro’s rally, however, was not built on strong fundamentals from the Eurozone itself. Economic data released Thursday highlighted ongoing fragility across the bloc. The Economic Sentiment Index slipped to 95.2 in August, down from a downwardly revised 95.7 in July and below consensus forecasts of 96. Industrial confidence also deteriorated, falling to -1.3 from -0.5, while consumer confidence remained deeply negative at -15.5. The numbers underscore a region struggling to find traction amid sluggish growth and persistent political risks.
One such risk stems from France, where opposition parties have refused to back Prime Minister Françoise Bayrou in an upcoming confidence vote scheduled for September. The standoff raises the prospect of another government collapse and snap elections, an unwelcome development for markets still digesting Europe’s political turbulence from earlier this year.
Still, the euro’s ability to rally despite weak regional data and political risks speaks volumes about the pressure weighing on the U.S. dollar. Beyond Williams’ dovish remarks, traders are also bracing for U.S. economic releases that could further shape expectations for Fed policy. Later Thursday, the Commerce Department will publish its second estimate of Q2 GDP, which economists expect to show a modest upward revision. Yet, investors may shrug off the GDP figures, focusing instead on Friday’s release of the Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) Price Index—for clearer signals about the September FOMC decision.
Technical Analysis
From a technical perspective, the EUR/USD pair has broken through near-term resistance at 1.1665, with momentum indicators suggesting further upside potential. The move above the 50-day exponential moving average has relieved some of the recent bearish pressure, allowing buyers to reassert control. The pair is now trading around 1.1632, holding comfortably above short-term support levels.
The Relative Strength Index (RSI), however, has entered overbought territory, flashing a potential warning that the rally could slow in the near term. If momentum persists, the next bullish target sits near 1.1750—a level that coincides with prior swing highs and represents a key test for buyers. On the downside, initial support lies at 1.1600, followed by stronger levels at 1.1575. A sustained drop below these thresholds would revive bearish momentum and negate the current recovery.
TRADE RECOMMENDATION
BUY EURUSD
ENTRY PRICE: 1.16650
STOP LOSS: 1.15700
TAKE PROFIT: 1.1750
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