EUR/USD Price Forecast: Hawkish ECB prospects support Euro

During the European trading session on Friday, the Euro (EUR) experienced a 0.17% increase, trading at approximately 1.1550 against the US Dollar (USD). This upward movement was driven by strong expectations that the European Central Bank (ECB) would raise interest rates in their September policy meeting. According to a Reuters poll, 57 out of 69 economists anticipated a 25 basis points (bps) increase in the ECB's deposit rates, bringing them to 2.50%.

Market experts also expressed confidence in the ECB's decision to tighten monetary conditions in September to address overheating inflation. HSBC analysts pointed out a growing divergence in the global policy outlook, highlighting the ECB's readiness to tighten rates compared to other major central banks' more cautious approach.

Traders were pricing out the possibility of a Federal Reserve (Fed) interest rate hike in September, which contributed to the US Dollar's decline. Deutsche Bank analysts noted a shift in Fed expectations due to softer inflation data, with the probability of a September hike dropping from 40% to 35%. EUR/USD currently trades around 1.1550, holding near the downward-sloping trendline at 1.1540 but is limited by the 100-day simple moving average (SMA) at 1.1567.

The Relative Strength Index (14) is at 60, indicating strong bullish momentum, but this sentiment has yet to overcome the overhead SMA, which continues to act as a ceiling. Initial support for EUR/USD is near the 1.1510 level, and the 100-day SMA at 1.1567 serves as the first resistance barrier. The major barrier for the pair is the round level at 1.1600.