EUR/USD Holds Near 1.1850 as Fed Decision Looms and ECB Data Signals Policy Impact

In July, industrial production improved from –0.6% to 0.3% month-over-month and from 0.7% to 1.8% year-over-year. Wages in Q2 rose from 3.50% to 3.70%, and the labor cost index increased from 3.40% to 3.60%. Today at 11:00 (GMT+2), inflation data will be released, expected to confirm that the figure remains slightly above the ECB’s target range: for August, consumer prices are projected at 0.2% MoM, bringing annual growth from 2.0% to 2.1%, while the core index, excluding food and energy, may reach 0.3% and 2.3%, respectively. Since mid-2024, the regulator has gradually cut interest rates by half, and Austrian National Bank Governor Martin Kocher noted that in recent decades its actions have become more pragmatic, guided by macroeconomic statistics. After officials left borrowing costs unchanged on Thursday, the probability of a deposit rate cut by the end of Q1 next year stands at below 50%.

The U.S. dollar is at 96.30 in the USDX, as investors await today’s FOMC monetary policy decision at 20:00 (GMT+2). Yesterday, Trump’s nominee to the Fed Board of Governors, Steven Miran, was sworn in and will participate in today’s vote on interest rates, strengthening the dovish side of the committee. Markets have already priced in a 25 bps rate cut and anticipate a total reduction of 150 bps by the end of next year. As a result, traders are focused on Jerome Powell’s comments and the updated “dot plot” of economic projections, due at 20:30 (GMT+2).

Support and Resistance Levels

On the daily chart, the instrument is testing the strong support line of the ascending channel with boundaries between 1.2300–1.1700.

Technical indicators are giving a buy signal: the fast EMAs of the Alligator indicator are above the signal line, expanding the trading range, while the AO histogram is forming corrective bars in the positive zone.

Resistance levels: 1.1920, 1.2250.

Support levels: 1.1770, 1.1400.

Trading Scenarios and EUR/USD Forecast

Long positions may be opened after a breakout and consolidation above 1.1920 with a target at 1.2250. Stop-loss at 1.1820. Time horizon: 7 days or more.

Short positions may be opened after a decline and consolidation below 1.1770 with a target at 1.1400. Stop-loss at 1.1870.