EUR/USD Price Forecast: Flatlines below 1.1550, while staying bearish under 100-day SMA
The EUR/USD pair holds steady near 1.1520 during the early European trading hours on Thursday. US inflation cooled on a year-over-year basis for a second straight month, easing pressure on the US Federal Reserve (Fed) to raise interest rates as soon as next month.
On Thursday, the EUR/USD currency pair maintained a steady position near 1.1520 during the initial European trading hours. The rate of US inflation, measured annually, saw a decrease for the second consecutive month, reducing the urgency for the US Federal Reserve (Fed) to increase interest rates in the following month. Market participants are eagerly awaiting the US Producer Price Index (PPI) data, which is scheduled for release later on Thursday.
Earlier, the Bureau of Labor Statistics in the United States disclosed that the US Consumer Price Index (CPI) increased by 3.4% on a year-over-year basis in July, aligning with expectations. The core CPI, which excludes food and energy costs, also rose by 2.5% year-over-year in July, matching forecasts. Both figures fell short of the previous month's readings.
The likelihood of a September Federal Reserve rate hike has been reduced by traders, dropping to 40%, according to the CME FedWatch tool. Additionally, Fed officials are set to receive August CPI and jobs reports before their scheduled meeting in September. However, the growing geopolitical tensions in the Middle East could strengthen the US Dollar (USD), acting as a negative factor for the EUR/USD pair.
Reports indicate that the United States and Iran are still at odds over reaching a permanent resolution to the ongoing conflict in the Gulf region. A high-ranking Iranian official stated that no progress has been made in discussions to restore the interim deal signed in June and determine a timeline for its implementation. According to analysts at Scotiabank, the Euro has entered the Wednesday trading session near the 1.1500 mark against the US Dollar, displaying a mixed performance against other G10 currencies.
The Euro has been primarily consolidating within a narrow, flat range since late July, with the absence of a clear directional driver in recent trading. In the daily chart, EUR/USD is currently trading below the 100-day simple moving average (SMA), implying a bearish near-term outlook. Despite a slightly positive momentum, as indicated by the Relative Strength Index (14), which is hovering around 56.
The pair is also trading above the 20-day Bollinger middle band SMA, which suggests that downside risks are currently limited. The upper Bollinger band nears 1.1612, representing a potential resistance level for the currency pair. Conversely, the initial support is positioned at the psychological 1.1500 level, followed by the 20-day Bollinger middle band at 1.1475.
Should the current price level break below these levels, a further decline could target the lower Bollinger band near 1.13375.
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