Euro Gains as Technical Signals Support Further Upside

Key Moments

EUR/USD Supported by German Data and ECB Expectations

EUR/USD is trading modestly higher near 1.1585 during Wednesday’s early European session, maintaining a constructive tone as it holds above the 100-day simple moving average. The Euro is advancing against the US Dollar after the latest German ZEW survey showed a stronger backdrop than anticipated, while market participants focus on a scheduled speech by European Central Bank (ECB) President Christine Lagarde later on Wednesday.

On Tuesday, the German ZEW Survey – Economic Sentiment rose to 34.2 in August from 26.3 previously, surpassing expectations of 30.00. The ZEW Survey – Current Situation also improved, moving to -61.1 in August from -77.6 in July, stronger than the consensus forecast of -68.8.

Interest-rate markets are increasingly reflecting expectations that the ECB will prolong its tightening cycle. According to the ECB Watch Tool, investors are assigning a 90% to 94% probability of a 25 basis points hike to 2.50% at the next policy meeting scheduled for September 9.

Dollar Index Holds Ground Despite Softer Fed Outlook

Even as recent US data has tempered expectations for further Federal Reserve rate increases, the Dollar index has remained resilient. Analysts at MUFG highlight that last week’s releases have “helped ease Fed rate hike expectations,” but have not yet led to notable unwinding of long Dollar exposure.

They emphasize that “DXY remains supported above the 200-day moving average level of 99.185,” and note that the more dovish policy outlook has not resulted in “any great sell-off” in the Dollar index.

Technical Picture: EUR/USD Maintains Bullish Bias

On the daily chart, EUR/USD continues to exhibit a positive near-term structure, with spot prices trading above both the 100-day moving average and the middle line of the Bollinger Bands. This configuration signals a constructive trend backdrop following the rebound from support at the lower Bollinger Band around 1.1364.

Momentum indicators are aligned with this bullish stance. The 14-day Relative Strength Index stands at 63.8, indicating that buyers retain the upper hand, although conditions are edging closer to, but not decisively into, overbought territory.

On the upside, the first area of resistance is the August 17 peak at 1.1614. A break above that level would turn attention to the upper Bollinger Band near 1.1650, where attempts to extend the rally could begin to encounter selling interest.

On the downside, the 100-day moving average at 1.1570 represents the nearest support, followed by the middle Bollinger Band at 1.1505. A more pronounced correction would expose the lower Bollinger Band around 1.1365, which is seen as a key level for preserving the broader bullish structure.