EUR/USD advances slightly to approach 1.1575 during the early hours of Monday’s Asian session. The probability of a September Federal Reserve rate increase has decreased to 33.1%. The United States and Iran persist in their ongoing conflict and contention regarding the Strait of Hormuz. The EUR/USD pair strengthens to approximately 1.1575 during the early Asian trading hours on Monday. The US Dollar edges lower against the Euro amid weaker-than-expected US economic data and shifting central bank expectations. Traders are expected to draw additional insights from the remarks of European Central Bank President Christine Lagarde on Wednesday. Retail sales in the United States experienced a decline of 0.6% month-over-month in July, contrasting with a modest increase of 0.2% in June, as reported by the US Census Bureau on Friday. This figure came in below the market consensus of a 0.1% growth. On an annual basis, Retail Sales increased by 5.0% in July compared to a revised figure of 6.8% (up from 6.7%).
Traders have scaled back their expectations regarding rate hikes from the US Federal Reserve in light of a series of weaker economic indicators, such as the Consumer Price Index, Producer Price Index, and Retail Sales. This, in turn, exerts pressure on the Greenback and serves as a supportive factor for the major pair. Markets are currently assigning a 33.1% probability to a rate hike in the upcoming month, a decrease from the 44% observed the previous week, as indicated by the CME FedWatch tool. Market participants continue to hold the view that the US central bank will be required to increase interest rates by the conclusion of 2026 in order to mitigate inflation, which has persistently exceeded the 2% target for over five years. Ongoing tensions in the Middle East, especially regarding energy supply routes, may strengthen a safe-haven currency like the USD relative to the EUR.
Iran’s Deputy Foreign Minister Kazem Gharibabadi urged the US to “accept the reality of defeat and stop indulging in delusions” following US President Donald Trump’s indication that he would soon declare the Strait of Hormuz a “territory of the United States.” On Friday, Iran’s Foreign Minister Abbas Araghchi said that there were “no negotiations currently taking place between Tehran and Washington.” Strategists highlight that the second Eurozone Q2 GDP release was “in line with expectations, printing 0.4% Q/Q to deliver a 1.0% Y/Y pace of growth.” They add that the external sector has also turned more supportive, with the region’s trade position improving as “the trade balance returned to a surplus in June, ending a short-lived deficit that emerged from March to May.” In the daily chart, EUR/USD remains positioned above the 100-day simple moving average and the middle line of the Bollinger Bands, maintaining a positive near-term bias as it gradually ascends within the upper half of the recent range.
The Relative Strength Index (14) at 63 indicates robust upward momentum; however, the spot is constrained by the resistance posed by the upper Bollinger band. On the topside, immediate resistance is delineated by the upper boundary of the Bollinger Bands at 1.1635, where buyers may exhibit reluctance to further extend the advance. On the downside, initial support is positioned at the 100-day SMA at 1.1570, followed by the Bollinger middle band near 1.1490 and the lower band around 1.1345. These levels are expected to provide a buffer against any corrective pullbacks, as the overarching bullish structure remains intact.
