EUR/USD Price Forecast: Hawkish ECB bets back fresh upside

The Euro (EUR) experienced a marginal increase in value against the US Dollar (USD) during Wednesday's European trading session. The EUR/USD exchange rate rose to approximately 1.1536, driven by the US Dollar's decline ahead of the United States' ADP Employment Change data for July, scheduled to be released at 12:15 GMT. The impact of the US private sector employment data on Federal Reserve (Fed) interest rate expectations is anticipated to be substantial, as officials have ceased providing forward guidance.

Strong expectations remain that the European Central Bank (ECB) will raise interest rates, with TD Securities estimating a 25 basis points (bp) hike in September, which is currently the base case. A recent statement from ECB Governing Council member Martin Kocher highlighted that he remains data-dependent for monetary policy outlook, but emphasized the central bank's commitment to reducing inflation to the 2% target on a sustainable basis.

EUR/USD is currently trading at 1.1537, maintaining a bullish near-term bias above the 20-period Exponential Moving Average (EMA) at 1.1461. The Relative Strength Index (14) stands at 62, indicating positive momentum, yet not yet in overbought territory. Immediate resistance on the upside is observed at the downward resistance trend line break price at 1.1544, while a clear daily close above this barrier would bolster the bullish outlook.

Conversely, the 20-period EMA at 1.1461 provides support, and a drop below this level would signal weakening bullish pressure, exposing the pair to the July 28 low at 1.1353. Despite a slightly softer tone in ECB Governing Council member Martin Kocher's 5.6/10 score on FXS Speechtracker, the conditional commitment to the 2% inflation target reinforces a data-dependent but still anti-inflation stance.

The possibility of a US-Iran deal to reopen the Strait of Hormuz is also expected to lift risk sentiment and support the US Dollar, keeping it on the back foot.