The EUR/USD currency pair traded in negative territory near 1.1665 during early European hours on Wednesday, pressured by a rebound in the US Dollar (USD) as markets turned cautious ahead of the US July Personal Consumption Expenditures (PCE) Price Index report scheduled for later in the day [1]. Economists expect core PCE, which excludes food and energy, to rise by 3.3% year-over-year in July, with ongoing energy risks from the Middle East conflict contributing to sticky inflationary pressures [1]. Market participants are closely watching for any signs of hotter-than-expected inflation, which could strengthen the case for a US interest rate hike in September and further support the Greenback against the Euro (EUR) [1].
According to the CME FedWatch tool, the probability of a 25 basis point rate hike in September stands at nearly 38.4%, a notable decrease from 67% earlier in the month [1]. Attention is also shifting to the upcoming speech by Federal Reserve Chairman Kevin Warsh at the Jackson Hole symposium on Friday, which could provide further insight into the outlook for US interest rates [1].
Analysts at UOB Group observed that EUR/USD has broken out of its recent tight trading range, invalidating their prior expectation for consolidation. The pair dipped to 1.1650, rose to 1.1679, and settled at 1.1674, marking a modest 0.10% gain [1]. UOB now sees tentative upward momentum building, with scope for the Euro to test 1.1695 in the near term, though they caution that the next resistance at 1.1710 is unlikely to be threatened [1]. On the downside, support levels are identified at 1.1665 and 1.1655 [1].
Technical analysis indicates that EUR/USD maintains a constructive bullish bias, trading above both the 100-day simple moving average and the 20-day Bollinger middle band [1]. The Relative Strength Index (RSI) at 67.27 is approaching overbought territory, suggesting firm upside momentum but also hinting that the advance may be stretched [1]. Immediate resistance is seen near the 20-day Bollinger upper band at 1.1705, with further buying potentially targeting the May 8 high of 1.1788 and the April 16 high of 1.1824 [1].
CONCLUSION
EUR/USD is under pressure as the US Dollar rebounds ahead of key US inflation data, with markets cautious about the potential for further US rate hikes. While technical indicators show tentative upward momentum for the Euro, overbought signals and resistance levels may limit gains in the near term. The upcoming PCE report and Fed commentary are likely to be decisive for the pair's next move.