EUR/USD records slight increases around 1.1655 during the early hours of Thursday’s Asian session. Money markets are preparing for a more aggressive stance from the ECB. Fed Chairman Kevin Warsh’s speech at the Jackson Hole symposium will be the focal point on Friday. The EUR/USD pair advances to approximately 1.1655 in the early hours of the Asian session on Thursday. A hawkish stance of the European Central Bank provides some support to the Euro against the US Dollar. Traders will pay close attention to the Jackson Hole Symposium event later on Friday for new momentum. The ECB is expected to increase the key interest rates in September, following a tightening in June aimed at managing price pressures in the context of persistent geopolitical tensions. Markets are currently assigning approximately a 25% probability to the ECB deposit rate hitting 3.0% by March 2027, with around a 60% likelihood by September, as reported.
ECB Executive Board member Isabel Schnabel stated on Wednesday that borrowing costs must increase further, as the protracted conflict in the Middle East and an unexpectedly robust euro-zone economy present upward risks to inflation. Across the pond, the Fed’s preferred inflation gauge aligned with expectations, as the core Personal Consumption Expenditures Price Index inflation remained stable at 3.3% YoY in July, according to data released by the US Bureau of Economic Analysis on Wednesday. Additionally, the headline PCE Price Index held steady at 3.7% YoY in July, surpassing the consensus estimate of 3.6%. In July, the PCE Price Index and the core PCE Price Index experienced a monthly increase of 0.2%. Market participants are poised to glean insights from the addresses delivered by Federal Reserve officials this week at the annual symposium in Jackson Hole, Wyoming. Fed Chairman Kevin Warsh’s speech will attract significant attention.
Strategists highlight that ECB policy expectations remain firmly skewed toward further tightening, with markets still “pricing 24bpts of tightening for the September 10th meeting and a cumulative 40bpts by year end.” They note that this persistent hawkish stance continues to underpin Euro sentiment, even as the currency’s recent rally shows signs of consolidation. In the daily chart, EUR/USD continues its upward trajectory, surpassing both the 100-day simple moving average and the 20-period simple moving average of the Bollinger Bands, which now support a favourable bullish outlook. Price is approaching the upper half of the Bollinger envelope, with the upper band serving as immediate overhead supply.
Meanwhile, the Relative Strength Index (14) at 65.8 indicates a tendency toward overbought conditions, suggesting that while upside momentum remains robust, it is becoming increasingly extended. On the downside, initial support is concentrated around the 20-period SMA at 1.1585, bolstered by the 100-day SMA at 1.1575 just below. Should a broader correction materialise, the lower Bollinger band at 1.1462 presents itself as a more substantial demand zone. On the topside, immediate resistance is situated at the Bollinger upper band around 1.1715. A sustained break above this level would pave the way for a continuation of the current bullish phase, whereas a failure to surpass it could lead to consolidation back toward the moving-average supports.
