The EUR/USD currency pair is trading near the 1.1600 mark, down approximately 0.10% for the day, as the US Dollar remains firm and traders await the preliminary reading of the Eurozone Harmonized Index of Consumer Prices (HICP) for August [1]. The pair has failed to capitalize on its recent bounce from the 100-day Simple Moving Average (SMA), hovering near a one-and-a-half-week low in the 1.1575-1.1580 region during the Asian session on Tuesday [1].
Economists anticipate that Eurozone inflation will rise in August, driven by elevated energy prices, which has increased expectations for a European Central Bank (ECB) rate hike in September. This sentiment was reinforced by German Consumer Price Index (CPI) data, which showed a year-on-year increase to 2.9% in August from 2.8% in July [1]. ECB executive board member Isabel Schnabel has advocated for another rate increase, though the immediate market reaction to the inflation report is expected to be muted [1].
On the US side, market participants are looking ahead to the ISM Manufacturing PMI and JOLTS Job Openings data later in the North American session. Comments from US Federal Reserve Chair Kevin Warsh last Friday have heightened expectations for an imminent interest rate hike, supporting demand for the safe-haven US Dollar amid ongoing geopolitical uncertainties [1]. This has contributed to downward pressure on the EUR/USD pair. However, traders may hold off on aggressive USD positions until the release of the US Nonfarm Payrolls (NFP) report on Friday [1].
Technical analysis indicates that a break below the 100-day SMA could trigger further declines in EUR/USD, with potential support at the 23.6% Fibonacci retracement level at 1.1501 and a broader structural floor near 1.1323. Immediate resistance is seen at the 38.2% Fibonacci retracement at 1.1611, with a daily close above this level needed to ease downside pressure and open the way toward 1.1700 and 1.1789 [1].
CONCLUSION
The EUR/USD pair remains under pressure as firm US Dollar sentiment and expectations for both ECB and Fed rate hikes dominate the market. Key upcoming data releases, including Eurozone HICP and US NFP, are likely to provide further direction. Until then, the fundamental backdrop favors the Greenback, with any EUR/USD rallies likely to be sold into.