EUR/USD Forecast: Break Above 1.1660 Targets 1.1780

The conflict in the Middle East continues to develop along a negative path, keeping energy prices elevated and adding to inflationary pressure. According to Eurostat, annual inflation in the euro area accelerated from 2.9% to 3.3% in August, remaining above the ECB’s 2.0% target.

All 65 economists surveyed by Reuters between August 31 and September 3 expect the ECB to raise its deposit rate by 25 basis points to 2.50% at the September meeting. In the previous survey, 83.0% of respondents had expected such a move. The changing interest-rate outlook remains an important driver for the pair, as also seen in FORECK.INFO’s previous EUR/USD forecast.

The U.S. Dollar Index declined toward 99.00 following comments from Federal Reserve Governor Christopher Waller. After Fed Chair Kevin Warsh delivered a hawkish message about persistent inflation, Waller said he would lean toward keeping rates unchanged in September if incoming data confirmed further disinflation. However, he would consider supporting a rate increase if inflation came in stronger than expected, according to his official economic outlook speech.

The remarks highlighted divisions within the Federal Reserve and reduced expectations of an immediate policy tightening. According to the CME FedWatch Tool, the probability of a September rate increase fell from 63.2% at the beginning of the week to 49.4%.

Support and Resistance

On the daily chart, EUR/USD remains above the lower boundary of a local ascending channel between 1.1550 and 1.1800.

Technical indicators are strengthening their buy signal. The fast EMAs of the Alligator indicator remain above the slow line, while the Awesome Oscillator histogram is forming corrective bars in positive territory.

Support levels: 1.1590, 1.1460.

Resistance levels: 1.1660, 1.1780.

EUR/USD Trading Scenarios and Price Forecast

Long positions may be opened after the price rises and consolidates above 1.1660, with a target at 1.1780. Stop-loss: 1.1580. Implementation period: seven days or more. Short positions may be opened after the price declines and consolidates below 1.1590, with a target at 1.1460. Stop-loss: 1.1680.