The euro has strengthened against the US dollar, climbing by 96 pips to 1.1745 and peaking at 1.1759. This is the highest level since July 27 and signals a breakout from recent fluctuations, especially if it closes above August’s highs. If this upward trend continues, the euro might encounter resistance at 1.1789 (the July high) and 1.1830 (the June high) before pushing higher. The earlier drop to 1.14 now resembles an inverted head and shoulders pattern, suggesting a possible target above 1.20.

European Central Bank Meeting Outlook

The European Central Bank is likely to keep interest rates steady at its next meeting. Recent European economic data has surprised with its strength, while US data has fallen short of expectations. This scenario highlights differing monetary policies, hinting at a potential recovery in Europe. In Italy, unemployment has reached its lowest level in decades, signaling improving economic conditions. With the US dollar weakening after a disappointing report on August 2025 non-farm payrolls (+115,000 jobs), the euro has broken out. The EUR/USD pair is now at 1.1745, its highest since late July 2025. This move indicates a genuine departure from recent stability, particularly as we surpass last month’s highs. For traders, this suggests it’s a good time to consider long-euro positions, potentially via call options for further gains. Key resistance levels to watch include the July high of 1.1789 and the June peak of 1.1830. The chart pattern developing since the dip to 1.14 this summer looks like an inverted head and shoulders, with a possible target of returning to the 1.20 mark, which we haven’t seen since Q1 2025.

Market Speculation on Monetary Policy

The current economic landscape supports this perspective. European data is outperforming unexpectedly weak US results. For instance, last week’s German IFO Business Climate index exceeded expectations, while the US ISM Manufacturing report fell into a contraction zone. This divergence will be a key point of discussion at the European Central Bank’s meeting on September 11, 2025. This growing contrast in economic strength could influence monetary policy decisions. The market is starting to believe that the ECB may be better positioned to maintain steady rates, while the US Federal Reserve faces increasing pressure. With Italian unemployment hitting a multi-decade low of 7.0%, the narrative of a European recovery is gaining traction. Create your live VT Markets account and start trading now.

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