EUR/USD Price Forecast: Hawkish ECB bets back fresh upside

The Euro (EUR) trades marginally higher at around 1.1536 against the US Dollar (USD) during the European trading session on Wednesday. The major currency pair edges up as the US Dollar ticks lower ahead of the United States (US) ADP Employment Change data for July, which will be published at 12:15 GMT.

According to estimates, US private employers hired 70K fresh workers, lower than 98K in June.

The impact of the US private sector employment data will be significant on the Federal Reserve’s (Fed) interest rate expectations as officials have stopped providing so-called “forward guidance”.

Meanwhile, the Euro is expected to trade strongly amid firm expectations that the European Central Bank (ECB) will hike interest rates.

Markets hold firm on September ECB hike expectations

According to TD Securities, market pricing remains aligned with its policy outlook, with investors "continue to fully price a 25bp ECB rate hike in September, which remains our base case." The bank sees no material shift yet in expectations around the upcoming meeting, underscoring the persistence of a hawkish bias in Eurozone rate markets.

While remarks from ECB Governing Council member Martin Kocher, released last week, showed that he remained data-dependent for the monetary policy outlook. However, Kocher has made clear that the central bank is committed to bringing inflation down to the 2% target on a sustainable basis.

EUR/USD technical analysis

EUR/USD trades at around 1.1537, holding above the 20-period Exponential Moving Average (EMA) at 1.1461, keeping the near-term bias constructive.

The Relative Strength Index (14) at 62 suggests positive momentum but is not yet in overbought territory, hinting that buyers retain control as long as price stays above the short-term EMA.

On the topside, immediate resistance is located at the downward resistance trend line break price at 1.1544, and a clear daily close above this barrier would strengthen the bullish outlook. On the downside, the 20-period EMA at 1.1461 offers initial support, and a drop back below this moving average would signal fading bullish pressure and expose the pair to the July 28 low at 1.1353.

Kocher flags data-dependent autumn decisions as geopolitical risks cloud Euro outlook

Kocher’s 5.6/10 score on FXS Speechtracker falls below the historic 6.3/10 average, pointing to a slightly less forceful tone than usual. The emphasis on how quickly geopolitical developments can alter energy prices and the inflation outlook underscores lingering upside risks to Euro area prices, which leans modestly hawkish despite the softer score.

The pledge that the ECB Governing Council will decide in autumn based on incoming data to bring Euro area inflation back to 2% on a sustainable basis reinforces a data-dependent but still anti-inflation stance. For the Euro, the combination of acknowledged inflation risks and conditional commitment to the 2% target suggests limited immediate policy aggression, but keeps the door open to renewed tightening rhetoric if energy-driven price pressures re-intensify into autumn.