EUR/USD Price Forecast: Likely find direction after US CPI data

• EUR/USD struggles for direction as investors await the US CPI data for August.
• Hot US PPI report has resulted in a fresh escalation in hawkish Fed prospects.
• The ECB is expected to raise interest rates again this year.

The Euro (EUR) trades subduedly at around 1.1608 against the US Dollar (USD) during the European trading session on Friday. The major currency pair has remained in a tight range between 1.1566 and 1.1641 for over 10 days, but is likely to find direction after the release of the United States (US) Consumer Price Index (CPI) data for August at 12:30 GMT.

The US CPI report is expected to show that headline inflation remained steady at 3.4% Year-on-Year (YoY), with core figures dropping to 2.4% from the previous reading of 2.5%.

Investors will pay close attention to the US consumer inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

Ahead of the US CPI data, a fresh escalation is seen in hawkish Fed interest rate expectations following the release of the hotter-than-projected Producer Price Index (PPI) report for August.

Meanwhile, the Euro struggles to attract bids even as market experts see the possibility of one more interest rate hike by the European Central Bank (ECB) this year despite the central bank raising policy rates by 25 basis points (bps) and President Christine Lagarde warning of price pressures remaining elevated in the policy announcement on Thursday

Economists at Commerzbank have shifted to a more hawkish view on the ECB’s policy path following President Lagarde’s latest remarks. Citing the “higher inflation rate expected for next year” and the ECB President’s statement that inflation will remain above the 2% target for an “extended period,” they write that “we have revised our ECB interest rate forecast.” The bank now projects “another 25-basis-point increase in the deposit rate to 2.75% in December” and, in a notable change, adds that “we no longer anticipate a reversal of the ECB’s rate hikes in the second half of next year.”

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1603. The pair trades close to the 20-period exponential moving average (EMA) at 1.1606, hinting at a sideways trend. The Relative Strength Index (RSI) hovers inside the 40.00-60.00 zone, which also signifies a volatility contraction.

On the topside, the immediate hurdle for the major currency pair is the high of the previous 10-day range at around 1.1641, followed by the August high at 1.1711. Looking down, the low of the previous 10-day range at around 1.1566 is the closest cushion; below that, the psychological level of 1.1500 is the key support zone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)