EUR/USD Forecast: Euro Targets 1.1780 as ECB Rate Hike Bets Rise

The euro is gaining support from rising expectations that the European Central Bank (ECB) could tighten monetary policy this year. The situation in the Middle East continues to develop negatively, contributing to further increases in energy prices. On Friday, spot natural gas prices reached a new yearly high, while the average price in August climbed to $744.0 per 1,000 cubic meters, the highest level in four years. Against this backdrop, analysts are pricing in several potential rate increases for the single currency, with the first move possibly coming as early as September if inflation data released today at 11:00 (GMT+2) confirms further price acceleration. Forecasts suggest that the annual consumer price index could rise from 2.9% to 3.3% in August, while the core indicator is expected to remain at 2.5%, which would represent a hawkish factor for the euro.

The U.S. dollar, which remains the main driver of the pair, continues to show unstable dynamics and is trading near 99.50 on the USDX index, below the key summer level of 100.00. The decline came amid rising geopolitical tensions in the Persian Gulf region. Following comments from U.S. Federal Reserve official Kevin Warsh about the need to combat elevated inflation, expectations of tighter monetary policy increased. The next major focus will be Friday’s labor market data, scheduled for release at 14:30 (GMT+2). If nonfarm payroll growth comes in near the forecast of 55.0 thousand, confirming further cooling in the labor market, expectations for a September rate increase could weaken again. According to the CME FedWatch Tool, the probability of such a move has already declined from 69.9% last week to 66.4%.

Support and resistance levels

On the daily chart, the trading instrument remains above the support line of an ascending channel with boundaries at 1.1780–1.1570.

Technical indicators strengthen the buying signal: the fast EMA lines of the Alligator indicator remain above the slow line while maintaining a stable trading range, and the AO histogram is forming corrective bars in positive territory.

Support levels: 1.1570, 1.1440.

Resistance levels: 1.1650, 1.1780.

EUR/USD Trading Scenarios and Price Forecast

Long positions can be opened after the price breaks above and consolidates above 1.1650, with a target of 1.1780. Stop-loss: 1.1550. Implementation period: 7 days or longer.

Short positions can be opened after the price declines below and consolidates under 1.1570, with a target of 1.1440. Stop-loss: 1.1670.