Profit-Taking Hits the August Rally: EUR/USD Eases to 1.159
Nothing rallies in a straight line, and the euro’s August surge is taking a well-earned breather.
EUR/USD has pulled back from last week’s high of 1.1712 to close at 1.1589, a drop of over a cent in five sessions. GBP/USD retreated from 1.3638 to 1.3540, and USD/JPY actually rose for the first week since the July shock, closing at 160.12. The dollar correction, it seems, has run its course — for now.
Three reasons the rally stalled
First, the easy money was made. From 1.1325 to 1.1712, the short-dollar trade delivered nearly 4% in eight weeks; at that point, even the believers take some chips off. Second, US data surprised firmer this week, quietly reviving the rate-gap argument for the dollar. Third, month-end approaches, and the historical pattern of corporate dollar demand in the final week of August is one of the more reliable seasonal flows in FX.
Correction or reversal?
The distinction matters enormously for positioning. A correction holds above 1.1567–1.1500 and eventually pushes to new highs above 1.1712. A reversal breaks 1.1500 and targets 1.1400, putting the spring downtrend back in play.
My read: this is a correction within a new, broader range. The dollar-rally narrative took real damage in July and August — it doesn’t rebuild in a week. But the euro needs fresh catalysts to take out 1.1712, and the calendar is thin until September’s central bank meetings.
Patience. The September Fed and ECB decisions will give this market the direction it needs. Until then, trade the range: 1.1570 to 1.1710 in EUR/USD, and don’t get married to either edge.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
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