Euro strengthens above 1.1550 on fading Fed hike bets

The EUR/USD exchange rate reached 1.1580 early Wednesday in Asia as the US Dollar weakened, prompted by lower inflation data from the United States. This data suggested a reduced likelihood of the Federal Reserve tightening monetary policy. Analysts will closely monitor ECB President Christine Lagarde's speech later in the day for more insights.

The Federal Reserve is expected to keep its interest rates unchanged in the September meeting and possibly through the year-end, according to most economists. Prior to this, the probability of a Fed rate hike in September dropped to nearly 65% after reports of job losses in July, softer consumer price inflation, and weaker retail sales.

The ongoing US-Iran conflict, which has been ongoing for six months, could also negatively impact the greenback. Meanwhile, markets are now pricing in a continued hike cycle from the European Central Bank, with a 90% to 94% chance of a 25 basis points increase to 2.50% at the September 9 policy meeting. ECB Chief Economist Philip Lane stated that Eurozone inflation remains high at 3%, although it appears modest compared to previous levels.

Despite this, the Euro has shown resilience, supported by better-than-expected German economic sentiment indicated by the August ZEW survey. The FXS Speechtracker score of 5.4/10, slightly below Lane's typical 6.4/10, reflects a more cautious tone despite the positive economic outlook. Traders are observing a gradual normalization in ECB policy decisions rather than a sudden tightening, which could keep the Euro from appreciating strongly.

EUR/USD's technical analysis shows a bullish bias, trading above its 100-day simple moving average and Bollinger middle band, indicating ongoing demand during minor dips. The next resistance level is near 1.1650, while immediate support can be found at the 100-day SMA at 1.1570 and the Bollinger middle band at 1.1505.