EUR/USD Holds Narrow Range Ahead of Key US PCE Signal

Key Moments

Range-Bound Trading Ahead of US Inflation Data

The Euro is confined to a narrow band against the US Dollar, with EUR/USD fluctuating close to 1.1660 during the Asian session on Wednesday. The pair lacks a clear trend as traders refrain from major positioning ahead of the United States Personal Consumption Expenditure Price Index (PCE) data for July, scheduled for release at 12:30 GMT.

Market participants are focused on how the PCE figures will shape expectations for the Federal Reserve’s policy outlook, particularly given the central bank’s reliance on this gauge as its preferred inflation measure.

Inflation Expectations: Gradual Cooling But Still Above Target

Wells Fargo is “not expecting much surprise on inflation,” pointing out that “the latest CPI and PPI reports point to a 0.1% gain in the PCE deflator in July, nudging the year-over-year rate down to 3.6%.” The bank anticipates that “core PCE inflation” will “rise 0.2% on the month, leaving the annual rate at 3.3%,” a profile they see as consistent with gradual disinflation but inflation still above the Federal Reserve’s objective.

Beyond the data, the primary event on the US calendar for EUR/USD traders will be comments from Federal Reserve Chair Kevin Warsh at the Jackson Hole Symposium, which is set to begin early Thursday.

ECB Outlook: One More Hike Expected in September

On the European side, sentiment in the market suggests that the European Central Bank is expected to raise interest rates at its September policy meeting.

Analysts at Deutsche Bank state that, in the absence of “clear evidence of broad-based second-round effects,” pushing policy beyond the “2.50% neutral upper bound is unlikely.” In that context, and despite the latest rise in Euro area inflation driven by energy, they “continue to expect a final 25bps ECB hike in September to a 2.50% terminal rate,” which they regard as the conclusion of the current tightening phase.

EUR/USD Technical Picture: Support, Resistance, and Momentum

On the daily chart, EUR/USD is quoted at 1.1664. The pair is trading above the 20-period Exponential Moving Average (EMA) at 1.1587, which keeps the short-term bias tilted to the upside as price trades close to the daily open pivot at 1.1664. Momentum remains solid, with the 14-period Relative Strength Index (RSI) near 68, signaling strong buying interest while indicating that conditions are approaching overbought levels.

Immediate support is located at the daily open and current pivot around 1.1664, with the 20-period EMA at 1.1587 acting as a secondary support region. On the topside, the pair needs to clear the August 21 high at 1.1711 to unlock further gains toward the May peak near 1.1800.

Strategists at Scotiabank also see few obstacles before that upper area. They noted that they remain constructive on EUR/USD, highlighting that the “RSI remains bullish around the overbought threshold at 70,” which they say reflects the robustness of recent advances. In their view, “the latest rally looks to have stalled above near-term resistance around 1.17,” but they emphasize “the absence of any additional meaningful resistance ahead of 1.18,” implying that upside risks remain intact in the near term. On the downside, Scotiabank sees “near-term support at 1.1650 and 1.1600,” and points to the “200 day MA at 1.1632” as a further technical level to monitor.

Key EUR/USD Technical Levels