EUR/USD stood at 1.1537 on Friday, as markets continued to analyse the latest economic data. Soft US inflation figures have diminished expectations for a Federal Reserve rate hike in September. Data released on Thursday indicated that producer prices remained unchanged in July. Together with the benign CPI report, this indicates that inflationary pressures have not yet begun to accelerate. Markets currently reflect a 35% likelihood of a 25-basis-point increase in the Fed rate for September, a decrease from the 55% observed the previous week. Moderate inflation diminishes the urgency for immediate policy tightening. Recent data also suggest that the initial inflationary impact of the Middle East conflict and high energy prices may be easing.
However, uncertainty surrounding a potential agreement and the reopening of the Strait of Hormuz continues to present risks to the inflation outlook. On the H4 chart of EUR/USD, the market remains within a consolidation range, currently spanning from 1.1511 to 1.1545, with the upper boundary being tested from below. The consolidation range around the 1.1546 level appears to be approaching its conclusion. An upside breakout would indicate a corrective move toward 1.1570, followed by a decline to 1.1492. A direct downside breakout would pave the way for a movement toward 1.1492, with potential for the trend to extend to 1.1400. The MACD indicator supports this scenario, with its signal line below zero and pointing downwards, reflecting continued bearish momentum.
On the H1 chart, the market has achieved an upward movement to 1.1543. A consolidation range is presently taking shape beneath this level. A decline toward 1.1492 is anticipated, succeeded by an ascent to 1.1536, and subsequently a resumption of the downward trajectory to 1.1400, with potential for an additional drop to 1.1330. The Stochastic oscillator corroborates this scenario, as its signal line remains beneath 80 and is trending downward toward 20, suggesting a rise in short-term downside pressure. EUR/USD remains range-bound as markets evaluate the implications of softer US inflation data, which have diminished the probability of a September Fed rate hike from 55% to 35%.
Producer prices remained unchanged in July, reinforcing the notion that inflationary pressures are easing. The initial impact of the Middle East conflict and elevated energy prices seems to be diminishing. However, uncertainty regarding a potential US–Iran agreement and the reopening of the Strait of Hormuz continues to present risks. Technically, the pair may experience a brief corrective movement toward 1.1570 before continuing its overarching bearish trajectory toward 1.1492 and possibly 1.1400. The short-term trajectory will hinge on forthcoming US economic indicators and geopolitical events.
