At yesterday’s meeting, European Central Bank (ECB) officials raised the deposit rate by 25 basis points to 2.50%. The decision reflected growing inflation risks associated with higher energy prices and heightened geopolitical tensions in the Persian Gulf. Oil prices have moved above 100.00, increasing concerns about a renewed energy shock, while the return of euro-area inflation to the ECB’s 2.0% target may take longer than previously expected. The ECB’s official monetary-policy decisions indicate that future action will continue to depend on incoming inflation and economic data. Markets are assessing whether additional tightening may be required later this year, as discussed in the previous EUR/USD forecast.
The US dollar remains volatile and is trading near 99.05 on the Dollar Index during the morning session, having strengthened yesterday amid the escalation of the Middle East conflict and rising Treasury yields. At 14:30 (GMT+2), August inflation data will be released and may prove decisive for the outlook for US borrowing costs. According to forecasts, the Consumer Price Index is expected to accelerate from 0.1% to 0.4% month-on-month and remain at 3.4% year-on-year. This has increased traders’ hawkish expectations and, according to the CME FedWatch Tool, the probability of a September interest-rate hike is currently near 67.0%.
Support and resistance levels
On the daily chart, the trading instrument is positioned above the support line of a local ascending channel with boundaries of 1.1800–1.1600.
Technical indicators are strengthening the buy signal: the fast EMAs of the Alligator indicator are above the slow ones, maintaining a stable fluctuation range, while the Awesome Oscillator histogram is forming corrective bars in positive territory.
Support levels: 1.1570, 1.1460.
Resistance levels: 1.1640, 1.1750.
EUR/USD trading scenarios and forecast
Long positions may be opened after the price rises and consolidates above 1.1640, with a target at 1.1750. Stop loss: 1.1580. Implementation period: seven days or more.
Short positions may be opened after the price declines and consolidates below 1.1570, with a target at 1.1460. Stop loss: 1.1650.
Scenario
| Timeframe | Weekly |
| Recommendation | BUY STOP |
| Entry point | 1.1640 |
| Take Profit | 1.1750 |
| Stop Loss | 1.1580 |
| Key levels | 1.1460, 1.1570, 1.1640, 1.1750 |
Alternative scenario
| Recommendation | SELL STOP |
| Entry point | 1.1570 |
| Take Profit | 1.1460 |
| Stop Loss | 1.1650 |
| Key levels | 1.1460, 1.1570, 1.1640, 1.1750 |
