EUR/USD Forecast: 1.1598 Holds Under a 1.1632 Ceiling
- EUR/USD trades at 1.1598, up 0.13% on the day but still nursing Friday's slide beneath its 4-hour moving-average band.
- Chair Warsh's Jackson Hole warning on inflation lifted September Fed hike odds to roughly 46% from 35%, handing the dollar the initiative.
- The 1.1632 average is the level that decides the next move; beneath it, rallies remain corrective.
Fundamental Analysis: EUR/USD
The dollar leg dominates here. The FOMC left its target at 3.50%-3.75% on 29 July, but three voters preferred a quarter-point increase, and Chair Kevin Warsh used his Jackson Hole keynote on 28 August to sharpen the point, citing PCE inflation running at 3.7% over twelve months and 4.1% annualised over six. He told the symposium the committee has work to do on prices, and market pricing for a September hike jumped to about 46% from 35% in a single session.
The euro is not defenceless. The ECB delivered its own quarter-point rise in June, its first in three years, taking the deposit rate to 2.25%, and the energy shock unsettling the Fed is feeding euro area prices too, with August HICP expected near 3.2% and core around 2.5%. A hawkish repricing on both sides of the Atlantic narrows the policy gap rather than widening it, which is why the euro's decline has been orderly rather than disorderly.
The balance still tilts to the dollar, because the Fed is the central bank being repriced fastest and because the euro area is the larger net energy importer of the two. That leaves this week's US calendar in charge: the ISM surveys and an August payrolls report consensus puts near 45,000. A soft print would loosen the dollar's grip quickly; a firm one entrenches it and keeps the euro pinned.
Technical Analysis: EUR/USD
The 4-hour chart shows the August advance from the 1.1500 area topping out at 1.1710 on 20 August, then rolling over into a sequence of lower highs through the 1.1660s. Friday did the damage: one wide bar cut through the entire moving-average band and printed 1.1584 before buyers stepped back in. Price now sits at 1.1598 with averages stacked overhead at 1.1604, 1.1627 and 1.1632, and only the slowest of the group, at 1.1561, still below the market.
Resistance begins at 1.1604 and thickens into the 1.1627-1.1632 band that capped the pair on the way down. Support runs at Friday's 1.1584 low, then 1.1561, with the early-August 1.1500 shelf beneath that. A four-hour close back above 1.1632 invalidates the bearish read and puts 1.1710 within reach again.
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