EUR/USD records slight increases around 1.1620 during the early hours of Tuesday’s Asian session. Germany’s CPI inflation increased to 2.9% year-on-year in August. Traders are increasing their wagers on a potential rate hike following remarks from the Fed’s Warsh regarding the need to address inflationary pressures. The EUR/USD pair is experiencing slight increases, hovering around 1.1620 in the early hours of the Asian session on Tuesday. The US Dollar strengthens against the Euro despite a hawkish Jackson Hole speech from Federal Reserve Chair Kevin Warsh. Traders will derive additional insights from the preliminary reading of the Eurozone August Harmonised Index of Consumer Prices, scheduled for release later on Tuesday.
Data released by the German statistics office Destatis on Monday indicated that the country’s Consumer Price Index inflation increased to 2.9% year-on-year in August, up from 2.8% in July. This figure aligned with market expectations and marked a third consecutive monthly increase. In August, the Consumer Price Index experienced a monthly increase of 0.2%, a decline from the previous reading of 0.8% and below the anticipated 0.3% rise. The European Central Bank policymakers have increased borrowing costs once and are expected to raise them again at the forthcoming policy meeting on September 10. Market participants are anticipating an additional tightening of monetary policy in the coming year.
Across the pond, hawkish remarks from the US central bank may support the Greenback and limit the potential gains for the major pair. Traders heightened their expectations for a September rate hike following Warsh’s assertion that the Fed will “have work to do” if policymakers lack confidence in the return of underlying inflation to its 2% target. Strategists note that Kevin Warsh used his Jackson Hole appearance to recalibrate market perceptions of his policy stance. In their words, Warsh “used his Jackson Hole comments to correct the impression of evasiveness and opacity that characterized his remarks following the July FOMC,” helping to address concerns over communication and restore a clearer policy signal ahead of the September FOMC.
In the daily chart, EUR/USD is currently positioned at 1.1622. The pair exhibits a positive outlook as the spot price rises above the 20-period Bollinger middle band at 1.1600 and the 100-day simple moving average around 1.1570, indicating a robust underlying framework following the recent rebound from the mid-1.15s. Momentum is positive, with the Relative Strength Index (14) at approximately 57, indicating sustained buying interest without having entered overbought territory. On the topside, immediate resistance aligns with the upper Bollinger band at approximately 1.1713, where gains may begin to encounter profit-taking. On the downside, initial support is positioned at the Bollinger middle band at 1.1600, succeeded by the 100-day SMA approximately at 1.1570; a more pronounced pullback would reveal the lower Bollinger band close to 1.1488 as a more significant demand zone.
