EUR/USD Price Forecast: 1.1600 Holds as ECB Hike and US CPI Loom

The EUR/USD pair is holding a modest bullish bias above 1.1600 as traders position ahead of the European Central Bank’s policy decision and key U.S. inflation releases. The pair traded near 1.1630 on Wednesday, with gains limited as investors await fresh signals on both European and U.S. monetary policy.

The European Central Bank is widely expected to raise interest rates by 25 basis points on Thursday. With the move largely priced into markets, attention is shifting toward the ECB’s guidance on future policy, particularly as higher energy prices are creating renewed inflation concerns across the euro area.

The euro has also benefited from recent weakness in the U.S. dollar. The Dollar Index was around 98.15 on Wednesday, close to its lowest level in almost two weeks. However, higher oil prices and expectations of tighter U.S. monetary policy could limit the dollar’s downside.

The next major catalysts are U.S. Producer Price Index data on Thursday and the U.S. Consumer Price Index on Friday. Strong inflation figures could reinforce expectations for another Federal Reserve rate increase, while softer data could reduce pressure on the euro-dollar pair.

ECB and US Inflation Drive Outlook

The policy divergence between the ECB and Federal Reserve remains central to EUR/USD direction. Markets are pricing the ECB’s expected September hike, while Fed rate-hike expectations have increased after stronger U.S. employment data.

Rising oil prices have complicated the outlook for both central banks. Brent crude has climbed toward $100 a barrel as Middle East tensions intensify, increasing the risk that higher energy costs will feed into inflation.

For EUR/USD, the key issue is whether the ECB sounds more hawkish after its expected hike and whether U.S. inflation validates expectations for tighter Fed policy.

• ECB: 25-basis-point hike widely expected Thursday.
• U.S. PPI: due Thursday.
• U.S. CPI: due Friday.
• Fed: rate-hike expectations remain sensitive to inflation data.

A hotter U.S. CPI reading would likely strengthen the dollar and pressure EUR/USD, while a softer report could weaken the dollar and give the pair room to extend its recovery.

1.1600 Support Keeps Bulls Alive

Technically, EUR/USD retains a constructive short-term structure while it remains above the 38.2% Fibonacci retracement at 1.1609 and the 200-period EMA at 1.1579 on the four-hour chart.

The Relative Strength Index is around 58, indicating positive momentum without reaching overbought territory. The MACD is also slightly positive, supporting the view that buyers retain an advantage.

The immediate resistance is the 50% Fibonacci retracement at 1.1698. A sustained break above that level would expose the 61.8% retracement at 1.1786, followed by resistance near 1.1912 and the 1.2072 swing high.

On the downside, 1.1609 is the first technical defense. A decisive move below that level would put the 200-period EMA at 1.1579 under pressure. Further weakness could expose 1.1500, followed by the 1.1323 cycle low.

Conclusion

EUR/USD remains technically constructive above 1.1600, but the next directional move will depend heavily on the ECB’s guidance and U.S. inflation data. A hawkish ECB combined with softer U.S. inflation would strengthen the bullish case toward 1.1698 and 1.1786. Conversely, a hotter CPI reading could revive Fed hike expectations, strengthen the dollar and push EUR/USD below 1.1609, with 1.1579 and 1.1500 becoming the next downside levels.