EUR/USD holds near 1.1520 as softer U.S. CPI reduces Fed hike bets. See key 1.1565 resistance, 1.1500 support and the latest bearish forecast.
EUR/USD remained subdued around 1.1520 during early European trading on Thursday, with the pair struggling to reclaim the 1.1550 area. The euro has found some support after softer U.S. inflation data reduced expectations for an aggressive Federal Reserve policy move, but the technical picture remains cautious while EUR/USD trades below its 100-day simple moving average (SMA).
Softer U.S. Inflation Eases Fed Pressure
U.S. inflation continued to cool in July, offering markets some relief on the interest-rate outlook. Data from the Bureau of Labor Statistics showed headline Consumer Price Index (CPI) inflation rising 3.4% year over year, down from 3.5% previously. Core CPI, which excludes food and energy prices, increased 2.5%, compared with 2.6% in the prior reading.
Both figures matched market expectations. The moderation has encouraged traders to reduce expectations for an imminent Federal Reserve rate increase. According to the CME FedWatch tool, the probability of a September rate hike has fallen to around 40%.
The market will now focus on additional inflation and employment data before the Fed’s September policy meeting. The July Producer Price Index (PPI), due Thursday, could provide another indication of whether underlying price pressures are continuing to ease.
Key U.S. developments include:
- Headline CPI eased to 3.4% from 3.5%.
- Core CPI declined to 2.5% from 2.6%.
- September Fed hike odds fell to about 40%.
Geopolitics Keeps Dollar Supported
Despite softer inflation, the U.S. dollar retains an important defensive advantage as geopolitical risks remain elevated. Continuing tensions involving the United States and Iran could increase demand for the dollar as a traditional safe-haven asset, potentially limiting EUR/USD gains.
Reuters reported that Washington and Tehran remain divided over efforts to establish a permanent end to the conflict in the Gulf. An Iranian official said negotiations had made no progress toward reviving an interim agreement reached in June and establishing a timetable for implementation.
That uncertainty creates a fundamental obstacle for the euro. Scotiabank analysts have described EUR/USD as largely flat against the dollar, with the pair spending much of August inside a narrow trading range. The lack of a major catalyst following the Federal Open Market Committee meeting in late July has reinforced the consolidation.
100-Day SMA Keeps EUR/USD Bearish
From a technical perspective, EUR/USD remains vulnerable while below the 100-day SMA at 1.1565. The Relative Strength Index (RSI) near 56 indicates moderately positive momentum, but it has not yet been strong enough to confirm a sustained bullish reversal.
The pair is trading above the 20-day Bollinger middle band at 1.1475, suggesting immediate downside pressure remains contained. However, resistance near 1.1565 and the upper Bollinger band around 1.1612 could restrict recovery attempts.
A sustained break above 1.1565 would improve the technical outlook and expose 1.1612. Conversely, a move below 1.1500 could reopen downside risks toward 1.1475, with deeper losses potentially targeting the lower Bollinger band near 1.13375.
Sources & Methodology
Primary-source standard: Market-moving facts should link to original data releases, regulator notices, company filings or official project announcements whenever available. Secondary reporting is used for additional context, not as a substitute for original evidence.
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