EUR/USD Soars to Highest Level Since May Amid Dollar Weakness

The EUR/USD exchange rate has reached its highest level since May, driven by improving European economic data and dollar weakness following the US Treasury's decision to expand its bond buyback program.

Business activity in the eurozone continued to expand in August, with Germany's industrial sector showing significant improvement. However, inflation remains above the ECB's target, keeping expectations of further policy tightening intact.

This week will be crucial for the EUR/USD, as markets await economic data from both Europe and the US. Key releases include the German Ifo business climate index on Tuesday, preliminary inflation figures from France on Friday, and a slew of US data including core PCE, GDP, durable goods orders, and nonfarm payrolls.

The technical analysis suggests that an upside breakout could open the way for a move towards 1.1811 before a potential pullback to 1.1581. However, a direct downside breakout would expose 1.1455 and potentially 1.1400.