The EUR/USD currency pair traded in positive territory near 1.1585 during early European hours on Wednesday, with the Euro edging higher against the US Dollar. This upward movement was attributed to the German ZEW Survey - Economic Sentiment for August, which came in at 34.2, significantly higher than the previous reading of 26.3 and above the estimated 30.00. Additionally, the ZEW Survey - Current Situation improved to -61.1 in August from -77.6 in July, also beating expectations of -68.8 [1].
Financial markets responded to these data points by increasing the probability of a European Central Bank (ECB) rate hike. The ECBWatch Tool indicated a 90% to 94% probability of a 25 basis points hike to 2.50% at the next policy meeting scheduled for September 9 [1]. ECB President Christine Lagarde is also set to speak later on Wednesday, which could provide further direction for the currency pair [1].
Despite softer expectations for US Federal Reserve rate hikes, the US Dollar Index (DXY) remained supported above the 200-day moving average level of 99.185. Analysts at MUFG noted that the recent easing in Fed rate hike expectations has not led to a significant sell-off in the Dollar index, with long Dollar positions largely intact [1].
From a technical perspective, EUR/USD maintains a bullish near-term bias, trading above both the 100-day moving average and the Bollinger middle band. The Relative Strength Index (14) stands at 63.8, suggesting buyers are in control but nearing overbought territory. Key resistance levels are identified at the August 17 high of 1.1614 and the Bollinger upper band near 1.1650, while immediate support lies at the 100-day MA at 1.1570 and the Bollinger middle band at 1.1505 [1].
CONCLUSION
The EUR/USD pair has gained strength on the back of stronger-than-expected German economic sentiment data and rising expectations for an ECB rate hike. While the US Dollar remains resilient, technical indicators suggest a constructive outlook for the Euro in the near term. Market participants will be watching for further cues from ECB President Lagarde's upcoming speech.