EUR/USD has softened to approximately 1.1575 during the early European session on Wednesday. Further consolidation cannot be dismissed given the lack of directional momentum indicated by the RSI. The first upside barrier emerges at 1.1600; the initial support level to watch is 1.1565. The EUR/USD pair experiences a decline, approaching 1.1575 in the early European session on Wednesday. The US Dollar strengthens against the Euro amid a hawkish Federal Reserve stance and escalating geopolitical tensions in the Middle East. Traders will monitor the forthcoming Eurozone Retail Sales and US employment data, scheduled for release on Friday.
Iran’s Islamic Revolutionary Guard Corps has asserted that it executed a “heavy” ballistic missile assault on Prince Hassan airbase and a US Marine base in Jordan, citing retaliation for prior US strikes that resulted in civilian casualties. The US military announced the completion of a series of strikes against Iranian targets on Tuesday, following what it characterised as attempted attacks by Iran on commercial shipping and American service members. Signs of rising tensions in the Middle East are boosting safe-haven flows, which in turn support the Greenback and create a headwind for the major pair. Furthermore, Fed Chair Kevin Warsh’s hawkish remarks at the Jackson Hole symposium may bolster the USD’s upward trajectory. 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. Traders are increasing their wagers on a rate hike in September following the remarks made by Warsh.
Expectations of a September Fed rate hike increased to 68%, rising from below 40% prior to the speech, as indicated by the CME FedWatch tool. BNY’s Geoff Yu highlights that ECB officials remain wary of the inflation outlook, noting that one policymaker “warned that prolonged disruption could sustain inflation pressure even without a wage-price spiral.” According to Yu, “that framing reinforces the path toward another ECB hike in September”: in his view, “policymakers appear increasingly unwilling to wait for second-round effects before acting,” with the ECB “more assertive than its peers” in leaning against the risk that price pressures become entrenched. In the daily chart, EUR/USD is positioned slightly above the 100-day simple moving average, providing immediate support; however, it remains below the 20-day Bollinger middle band, which results in a marginal cap within its recent range.
The Relative Strength Index at 49.8 indicates a state of neutrality, reflecting a lack of directional momentum as the price stabilises within the confines of proximate support and resistance levels. On the topside, the immediate resistance level is situated at 1.1600, which corresponds to the Bollinger middle band and serves as a psychological threshold. A more significant barrier is observed at the upper Bollinger band near 1.1710, where recent rallies would likely encounter supply. On the downside, immediate support is delineated by the 100-day SMA at 1.1565. A break below this level would expose the lower Bollinger band around 1.1490, opening the door to a deeper pullback within the broader consolidation.
