EUR/USD is currently trading in a stable manner at approximately 1.1590 during the early hours of Thursday’s Asian session. Traders have increased their wagers on a September rate hike following the remarks made by Fed Warsh. ECB’s Makhlouf stated that the central bank must be ready to increase interest rates further. The EUR/USD pair remains stable around 1.1590 in the early hours of the Asian session on Thursday. The potential upside for the major pair appears constrained in light of hawkish Federal Reserve expectations and the intensifying conflict in the Middle East. The US August ISM Services Purchasing Managers Index report is scheduled for release on Thursday. On Friday, market participants will pay close attention to the US Nonfarm Payrolls data.
Fed Chair Kevin Warsh cautioned last week that policymakers might have to implement further tightening measures if inflation does not demonstrate a clear trajectory toward the 2% target. His hawkish remarks could bolster the USD and serve as a headwind for the pair. Expectations of a September Fed rate hike increased to 62.3%, a rise from below 40% prior to the speech, as indicated by the CME FedWatch tool. US President Donald Trump stated on Wednesday that strikes on Iran would probably be brief, emphasising that the US maintains control over the Strait of Hormuz. Meanwhile, Supreme National Security Council Secretary Mohsen Rezaei stated that Washington will soon observe Tehran’s “new strategy” for war. Rising tensions in the Middle East may lead to increased safe-haven flows, thereby bolstering the Greenback.
Across the pond, European Central Bank policymaker Gabriel Makhlouf stated that the central bank must not hesitate to implement additional interest rate hikes if inflation “starts moving in the wrong direction.” ECB Governing Council member Joachim Nagel stated on Wednesday that markets perceive a greater than 95% probability of a rate hike in September. Euro sentiment deteriorates as the recovery in oil prices reignites concerns regarding the terms of trade. Strategists at Scotiabank emphasise that the recent decline of the Euro corresponds with a resurgence in energy markets, pointing out that “the renewed deterioration looks to have coincided with the latest recovery in oil prices, sparking concerns about the euro area’s terms of trade as a major energy importer.” They suggest that the shift in commodity dynamics is undermining support for EUR even as yield spreads remain broadly favourable, reinforcing the market’s increasingly bearish tone toward the single currency.
In the daily chart, EUR/USD is positioned at a pivot near the day’s opening level and maintains a position above the 100-day simple moving average, indicating a slight underlying demand. However, it continues to be constrained below the middle line of the Bollinger Bands. The Relative Strength Index at 51.80 indicates a neutral position, suggesting that near-term momentum is balanced. This scenario allows for the possibility of either a slight upward continuation or further consolidation around the existing levels. On the topside, initial resistance is observed at the Bollinger middle band around 1.1605, followed by a more significant barrier at the upper Bollinger band near 1.1708. On the downside, immediate support is defined by the 100-day SMA at 1.1565, with a deeper cushion at the lower Bollinger band around 1.1500, where buyers would be expected to show more interest if the pair extends its pullback.
