EUR/USD Price Forecast: Remains sticky to 20-day EMA

The Euro drops to near 1.1610 against the US Dollar as the latter rebounds.
Investors await the key ECB policy meeting and the US CPI data for August.
The ECB is anticipated to hike policy rates on Thursday.

Sagar Dua FXStreet

The Euro (EUR) is down 0.1% at around 1.1610 against the US Dollar (USD) during the European trading session on Tuesday. The major currency pair trades lower as the US Dollar turns positive after a weak start.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher at around 99.00.

Financial markets expect the US Dollar to remain rangebound as a slight improvement in Federal Reserve’s (Fed) interest rate hike expectations, following strong United States (US) Nonfarm Payrolls (NFP) data for August, has limited its downside, while positive commentary from Fed members on inflation has restricted the upside.

Going forward, the release of the US Consumer Price Index (CPI) data for August on Friday is expected to bring a decisive move in the US Dollar.

Meanwhile, the Euro is also expected to remain in a limited range as investors await the European Central Bank’s (ECB) interest rate decision on Thursday.

According to ABN Amro, “the path for the ECB is clear, and a rate hike at Thursday’s Governing Council meeting is fully priced by financial markets”.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1612, holding a neutral near-term bias as it remains close to the 20-period exponential moving average (EMA) at 1.1601. This close alignment between price and the short-term EMA suggests the pair is consolidating its recent gains rather than reversing, while the Relative Strength Index (RSI) at 54 keeps momentum in neutral-to-positive territory, hinting that buyers still retain a slight edge.

On the downside, initial support is seen at the 20-period EMA near 1.1600, where dip-buying interest could emerge if the pair pulls back. The major currency pair could slide to the psychological level of 1.1500 if it fails to hold the 20-day EMA. Looking up, the August high at 1.1710 is the key hurdle for the pair.

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

Economic Indicator

ECB Main Refinancing Operations Rate

One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.

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