EUR/USD Forecast: Euro Holds Below 1.1600 as ECB Hike Bets Build
- EUR/USD trades near 1.1585, up around 0.17% on the day and holding just under the 1.1600 handle.
- The policy gap is narrowing: the ECB has delivered its first hike in three years while the Fed sits on hold with dissenting votes.
- The 4-hour structure stays constructive above 1.1500, and 1.1600 is the level that decides the next leg.
Fundamental Analysis: EUR/USD
The euro's August recovery rests on a shift in relative policy expectations. The European Central Bank raised rates by 25 basis points in June 2026, its first increase in three years, then held steady on 23 July while warning that persistently elevated energy costs risk feeding into broader inflation through indirect and second-round effects. Money markets now price roughly a 70% chance of a further increase in September.
On the other side of the pair, the Federal Reserve left its target range at 3.50%-3.75% in July for a fifth consecutive meeting. The vote was not unanimous: three officials preferred a 25 basis point hike, a hawkish detail that keeps the dollar's carry advantage intact.
That leaves EUR/USD driven less by direction than by the pace of convergence. A central bank at the start of a tightening sequence has more capacity to surprise than one already parked at the end of its cycle, which is the core bullish argument for the euro here. The offset is energy: sustained crude strength lifts euro area headline inflation but damages the region's terms of trade, which explains why hawkish ECB pricing has not yet converted into a clean breakout.
Technical Analysis: EUR/USD
The 4-hour chart shows a stair-step advance from the late-July low near 1.1350, with price accelerating through 1.1500 in early August and then consolidating in a 1.1500-1.1600 band. Moving averages are stacked bullishly beneath spot near 1.1555, 1.1537 and 1.1511, and every pullback into that cluster has so far been absorbed.
Resistance is clearly defined at 1.1600, and a sustained 4-hour close above it opens 1.1650. On the downside, 1.1550 is the first shelf, followed by the 1.1500 pivot. A confirmed 4-hour close below 1.1490 would break the bullish structure and turn the August advance into a completed range.
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