The EUR/USD currency pair gave back its early gains and stabilized around 1.1625 during the European trading session on Wednesday, as the US Dollar recovered from earlier losses. At the same time, the US Dollar Index (DXY) was reported to be trading flat at 98.82, reflecting a pause in directional momentum for the Greenback [1].
Market participants are closely watching the upcoming United States Consumer Price Index (CPI) data for August, scheduled for release on Friday. According to TD Securities, underlying inflation is expected to remain contained, with core CPI likely rising 0.19% month-over-month (2.3% year-over-year), while headline CPI is forecast to increase by 0.37% month-over-month (3.4% year-over-year), mainly due to higher energy prices and a slight uptick in food inflation. The services segment is anticipated to be the main driver of core inflation, while core goods prices are expected to post a modest monthly decline [1].
The inflation data is seen as a key determinant for the Federal Reserve's monetary policy outlook. The CME FedWatch tool indicates a 60% probability that the Fed will raise interest rates at its September policy meeting, highlighting the market's sensitivity to the upcoming CPI figures [1].
Meanwhile, the Euro is expected to trade sideways ahead of the European Central Bank (ECB) monetary policy announcement on Thursday. Market expectations point to a 25 basis point rate hike by the ECB, with strategists at Scotiabank noting that policymakers are likely to maintain a hawkish tone to counter energy-driven inflation risks and prevent broader inflationary pressures [1].
From a technical perspective, EUR/USD is trading at 1.1626, maintaining a modest bullish bias as it remains above the 20-day Exponential Moving Average (EMA) at 1.1605. The Relative Strength Index (RSI) is around 57, suggesting neutral-to-positive momentum. Key resistance is identified in the 1.1686-1.1710 zone, while immediate support lies at the 20-day EMA, with a break below potentially exposing the 1.1500 level [1].
CONCLUSION
EUR/USD is consolidating as traders await critical US inflation data and the ECB's policy decision. Both events are expected to shape near-term direction, with technical indicators suggesting a modest bullish bias but key resistance ahead. Market sentiment remains cautious, reflecting the importance of upcoming macroeconomic releases.