**EUR/USD: Key Considerations for Trading in August**
*By Justin Bennett (credit: original analysis at Daily Price Action)*
The EUR/USD currency pair is among the most liquid and actively traded forex instruments in the world, making it a constant focus for traders and investors alike. As August develops, new dynamics are shaping the price action of the pair, delivering both opportunities and challenges.
This article breaks down the major technical and fundamental factors in play for EUR/USD in August, outlines price levels that every trader should keep an eye on, and provides strategic insights into navigating what could be a volatile month.
—
## Recent Performance and Context
EUR/USD experienced pivotal swings in the preceding weeks as traders digested developments from the Federal Reserve, the European Central Bank (ECB), and changing global risk appetite. Going into August, the pair is positioned at an important technical juncture, influenced by:
– Fed/ECB interest rate expectations
– US inflation trajectory and economic data
– Ongoing geopolitical uncertainty
– Broad shifts in global risk sentiment
August also historically brings periods of lower liquidity as Europe’s summer holiday season peaks, making moves potentially sharper and more erratic than usual.
—
## Key Fundamental Drivers
**1. Divergence in Monetary Policy**
The policy paths of the Fed and the ECB will remain pivotal.
– The Fed has signaled a possible end to its tightening cycle, but with strong US data, market pricing remains data-dependent.
– The ECB recently raised rates but faces a more fragile Eurozone growth outlook and patchy inflation progress.
– Any data surprises—strong or soft from either side—could tip expectations for future hikes, lending directional momentum to EUR/USD.
**2. US Economic Updates**
Several releases this month can cause significant volatility:
– US CPI inflation data
– NFP jobs report
– FOMC meeting minutes
Stronger-than-expected inflation or employment numbers could reignite Fed hawkishness, bolstering the dollar. Softer data would conversely pressure USD and support EUR/USD upside.
**3. Eurozone Growth Concerns**
Europe’s economic backdrop remains mixed:
– German industrial and manufacturing sectors are flashing signs of weakness.
– Southern European countries have fared better, but overall growth remains subdued.
– If data for Q3 skews to the downside, it may force the ECB into a more dovish stance, weighing on the euro.
**4. Global Risk Appetite**
Broad risk trends, including equity volatility and emerging markets sentiment, play a role. The US dollar often acts as a safe haven, so spikes in risk aversion (due to geopolitical flare-ups, for example) can lift USD and drag EUR/USD lower.
—
## Technical Analysis: August Levels to Watch
A clear understanding of the EUR/USD technical setup is essential. Justin Bennett’s original analysis highlights several crucial price zones and patterns:
**1. The Year-to-Date Range**
– EUR/USD remains within a broad 1.0500–1.1200 range for much of 2023.
– The pair pivoted near key midpoints and previous highs/lows, reflecting the market’s indecision about long-term direction.
**2. Support and Resistance Zones for August**
– Immediate support: 1.0940–1.0950 area (recent swing lows)
– Next downside zones: 1.0830–1.0850 (major technical/support area), followed by 1.0720 if the selling continues
– Key resistance: 1.1100 (round number and prior swing high)
– Bullish breakout could target 1.1200 and above if strong buying persists, marking a possible new cycle high
**3. Chart Patterns and Trendlines**
– The pair has recently tracked sideways, with minor higher lows keeping near-term structure constructive.
– Watch for a sustained daily close above or below the flagged support/resistance for clearer directional clues.
– A break below 1.0950 and subsequent retest could
Read more on GBP/USD trading.