EUR/USD: The euro thrives over the weak dollar

The euro continues its rebound against the dollar, driven by a more favorable macroeconomic environment in the eurozone and a weakening greenback. The prospect of a peace agreement in Ukraine is fueling renewed optimism, reinforced by the announcement of diplomatic contacts between Donald Trump and Vladimir Putin. This momentum is benefiting European assets, particularly sectors linked to consumption, growth, and reconstruction. Furthermore, the latest data on eurozone retail sales confirm resilient demand, with growth of 3% year-on-year in June, exceeding expectations.

In the US, the USD is penalised by disappointing statistics and a climate of institutional uncertainty. The nonfarm payrolls report published last Friday revealed a marked deterioration in labor market conditions, with job creation below expectations and downward revisions for previous months. Expected increases in weekly jobless claims are accentuating this trend. As a result, expectations of a Federal Reserve rate cut are strengthening: markets now price in a 94% probability of a 25 basis point cut at the September meeting, compared to 47% a week earlier.

The political climate adds an additional factor of distrust. Donald Trump's decision to fire the head of the Bureau of Labor Statistics, whom he accuses of publishing biased figures, is fueling fears of increased politicization of economic institutions. The imminent nomination of a replacement for outgoing Fed Governor Adriana Kugler, as well as speculation surrounding Jerome Powell's successor, are contributing to increased uncertainty. The candidates being discussed, such as Kevin Warsh and Kevin Hassett, are perceived as supporters of more pronounced monetary easing, which is further weighing on the dollar.

On the technical front, the European currency is regaining clearly bullish momentum. The recovery is supported by a series of impulsive candlesticks, reflecting persistent buying pressure. A close above 1.17 would reinforce this signal and open the way to annual highs, with a target around 1.20, an important psychological threshold for traders. The pattern remains favorable as long as the euro remains above the 1.14 support zone.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD exchange rate.

Our entry point is at $1.1682. The price target for our bullish scenario is $1.1970. To protect the invested capital, we recommend placing a protective stop loss at $1.1380.

The expected return on this strategy is 288 pips and the risk of loss is 302 pips.