The euro saw a significant rise against the dollar last month, marking its strongest performance since December 2023. This upward movement was driven by market expectations of a Federal Reserve rate cut, which weakened the dollar and bolstered the EUR/USD pair. However, the bullish momentum faced resistance at the 1.1200 level, leading to a correction as the dollar regained strength.

In the final week of August, the euro dropped by -1.40% against the dollar, influenced by three consecutive bearish days that broke both a higher low and an ascending trendline on the hourly chart. This shift turned the market’s short-term outlook from bullish to bearish, according to Traders Union. Despite the pullback, EUR/USD found support at the 1.1040 level, closing August with an overall gain of 2.2%.

As September begins, the EUR/USD pair is holding above the 20-day EMA, indicating potential support for further gains. Traders are closely monitoring the possibility of rate cuts by both the European Central Bank (ECB) and the Federal Reserve, as inflation continues to decline in both regions. In the U.S., the core personal consumption expenditures (PCE) index met expectations, rising by 0.2% month-over-month, while European inflation significantly slowed to 2.2% in August, marking the slowest pace since mid-2021.