EUR/USD edged 0.1% lower to around 1.1610 during Tuesday’s European session as the US Dollar regained momentum after opening weaker. The currency pair remains close to its short-term trend support, leaving its immediate outlook broadly neutral while traders await major US and European policy signals.
The US Dollar Index (DXY), which measures the greenback against six major currencies, was trading around 99.00, up 0.1%. The modest dollar recovery has limited EUR/USD’s upside, although the pair continues to hold above its key short-term technical support.
Recent US employment data have also influenced expectations for Federal Reserve policy. Strong August Nonfarm Payrolls reduced some expectations for near-term monetary easing, helping prevent a deeper decline in the dollar.
However, the greenback has struggled to establish a sustained bullish trend as investors remain focused on inflation and the Fed’s next policy decision.
The next major US catalyst is the August Consumer Price Index (CPI), due Friday. A stronger-than-expected inflation reading could lift Treasury yields and support the dollar, while softer inflation could revive expectations for easier Fed policy.
ECB decision keeps euro in focus
The euro faces its own major catalyst this week as the European Central Bank prepares to announce its interest-rate decision on Thursday. Markets have largely priced in a 25-basis-point rate hike, meaning the accompanying policy guidance could have a greater impact on EUR/USD than the decision itself.
ABN Amro has described the ECB’s policy path as clear, with the expected rate increase already fully reflected in market pricing. Investors will therefore focus on comments about inflation, economic growth and the possibility of additional tightening.
For EUR/USD, the key fundamental drivers are:
- Thursday: ECB interest-rate decision
- Friday: US August CPI report
- Current DXY: Around 99.00
A hawkish ECB stance could strengthen the euro, while a hotter US CPI reading could increase demand for the dollar. This combination could keep EUR/USD volatile around its current levels.
1.1600 EMA remains crucial support
On the daily chart, EUR/USD trades around 1.1612, only slightly above its 20-period exponential moving average at 1.1601. The narrow gap between price and the EMA indicates that the pair is consolidating recent gains rather than showing a clear trend reversal.
The Relative Strength Index (RSI) stands at 54, pointing to neutral-to-positive momentum. While the reading does not indicate an overbought market, it suggests buyers retain a modest advantage.
The 20-day EMA around 1.1600 is therefore the first technical level to watch. A sustained hold above this area would preserve the short-term bullish structure and keep the August high at 1.1710 as the next major upside target.
A decisive break below 1.1600, however, would weaken the setup and expose EUR/USD to the psychological 1.1500 level.
Key technical levels include:
- Support: 1.1600, followed by 1.1500
- Resistance: 1.1710
- RSI: 54, neutral-to-positive
A break above 1.1710 could signal renewed bullish momentum, while a daily close below 1.1600 would increase the probability of a deeper correction.
Conclusion
EUR/USD remains closely tied to its 20-day EMA around 1.1600 as traders await the ECB decision and US CPI data. The RSI at 54 gives buyers a slight technical advantage, but the pair lacks a decisive directional signal. Holding above 1.1600 keeps the August high at 1.1710 within reach, while a break below the EMA could shift attention toward 1.1500. The coming ECB and US inflation events are likely to determine which level breaks first.
Sources & Methodology
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