Trading Week Ahead, August 17 to 21, 2026: EUR/USD’s Second Run at 1.1600

Last week, EUR/USD tested 1.1600 and failed. This week, it is testing that same level again. But the technical picture looks different this time.

The pair has broken above its 200-day EMA since the last attempt. That is a real shift, not just noise. Still, the driver behind it remains unresolved. Traders are still debating how many more times the Federal Reserve will raise rates.

Wednesday’s FOMC minutes could move that debate forward. So could Monday’s Canadian inflation print and Tuesday’s UK data. Both shape the broader dollar and sterling backdrop this pair trades against.

THE FED’S HIKE DEBATE ISN’T SETTLED

Softer US data has traders questioning how many hikes the Fed can still deliver. That idea has done real work for EUR/USD this month.

But the argument is not one-sided. Other Fed officials disagree. One, from the Federal Reserve Bank of Cleveland, has pointed to several more hikes this year.

The bond market has not fully sided with the doves either. Yields remain elevated. That keeps the interest rate differential working in the dollar’s favour, even as the euro’s technical picture improves.

So the tension is clear. EUR/USD’s chart looks stronger. The rate story behind it does not.

Wednesday’s FOMC minutes could settle part of that question. They cover the discussion behind the Fed’s last decision. That gives traders a rare look at which side of the debate carries more weight inside the committee.

THE ENERGY WILDCARD FROM THE MIDDLE EAST

Weekend risk has not gone away just because the calendar looks quiet. Tensions in the Middle East remain unresolved heading into this week.

If that risk escalates, energy prices could climb. Higher energy costs tend to feed into inflation. That cuts against the case for fewer Fed hikes. It would also tend to favour the dollar.

There is a second risk for the euro specifically. If European energy availability becomes a concern this winter, that pressure could hit the euro from a different angle entirely.

Neither scenario is priced with certainty. But together, they add a layer of risk the charts alone will not show.

EUR/USD: THE 1.1600 TEST, TAKE TWO

EUR/USD’s break above its 200-day EMA gives this week’s test more weight than last week’s. A clean break above 1.1600 could open the door toward 1.1700 next.

If the euro holds gains beyond that, the next real resistance sits closer to 1.1850. That level marks the top of the consolidation this pair has traded inside for roughly 18 months. It is a longer horizon level, not this week’s story. But it shows how far this move could stretch if the improvement holds.

The downside case matters just as much. A pullback could bring the 1.1500 area back into focus. The 50-day EMA offers additional support there. Below that, the longer-term range floor near 1.1400 remains the level that has held for more than a year.

So what would confirm the stronger read? A hold above 1.1600 on renewed momentum would do it. So would a Fed narrative that keeps leaning toward fewer hikes. A slide back under the 200-day EMA would suggest last week’s rejection was the more accurate signal.

WHERE ELSE MOMENTUM IS BUILDING: GBP/USD AND THE LOONIE

EUR/USD is not the only pair worth watching this week. GBP/USD is pressing toward 1.3600, with resistance extending to 1.3700 above that.

Sterling has been one of the stronger performers against the dollar recently. That makes Tuesday’s UK claimant count and CPI data a genuine catalyst, not a routine release.

USD/CAD tells a related story from the other side of the dollar trade. The pair has fallen into the zone between its 50% and 61.8% Fibonacci retracement levels. Technical traders often watch that zone for a possible turn.

That does not confirm a longer-term trend change on its own. But it does mean Monday’s Canadian CPI print carries more weight than usual.

KEY EVENTS THIS WEEK

Monday’s Canadian inflation data lands first. It could set the tone for USD/CAD heading into the rest of the week. A hotter than expected print would push back against the case for a weaker dollar, not just against the loonie.

Wednesday is the heaviest day on the calendar. The FOMC minutes arrive in the early afternoon. Australian jobs data follows that evening. Between the two, traders get a read on the Fed’s internal debate and a key labour print.

WHAT THIS MEANS FOR TRADERS

This is not a week to assume the technical improvement in EUR/USD settles the argument. It is a week to watch whether the fundamentals catch up to the chart.

If the minutes lean dovish and EUR/USD holds above 1.1600, the range that has capped this pair could finally crack. If they reinforce the case for more hikes instead, the euro’s recent strength could stall right where it did last week.

Either way, the reaction to Wednesday’s release matters more than any forecast going in. That is the kind of environment where risk management matters more than conviction on direction. It tends to separate disciplined traders from the rest.

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FREQUENTLY ASKED QUESTIONS

WHY IS 1.1600 SUCH AN IMPORTANT LEVEL FOR EUR/USD RIGHT NOW?

EUR/USD failed to clear 1.1600 last week even after a weaker US jobs report. This week, the pair is testing that same level again, but from above its 200-day EMA. That gives this attempt more technical backing than the last one.

WHAT HAPPENS IF THE FED DELIVERS MORE RATE HIKES THAN THE MARKET EXPECTS?

Additional hikes would tend to support the US dollar by keeping the interest rate differential in its favour. That could cap EUR/USD’s upside even as the technical picture improves. Bond yields and rate expectations remain a key driver for this pair.

WHY DO FOMC MINUTES MATTER IF THE RATE DECISION ALREADY HAPPENED?

The minutes reveal how divided policymakers were behind a decision markets already know. For EUR/USD, caught between a dovish narrative and hawkish pushback, that detail can matter more than the original announcement.

COULD TENSIONS IN THE MIDDLE EAST AFFECT EUR/USD THIS WEEK?

They could, through two separate channels. Higher energy prices would tend to support US inflation and the dollar. Any threat to European energy supply heading into winter could weigh on the euro directly.

DISCLAIMER

This content is produced by ThinkCapital for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or a solicitation to trade. All trading involves risk, and past performance is not indicative of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. ThinkCapital’s challenge programmes involve simulated trading environments using virtual funded accounts. The term “funded” refers exclusively to virtual funding, and no real capital is deployed in ThinkCapital challenge accounts. Traders should ensure they understand the risks involved before participating in any financial market activity.