EUR/USD Price Forecast: Upbeat US Dollar stresses on major currency pair

The Euro (EUR) trades 0.2% lower to near 1.1593 against the US Dollar (USD) during the European trading session on Tuesday. The major currency pair is under pressure as the US Dollar outperforms its peers due to increased expectations that the Federal Reserve (Fed) will raise interest rates in the near term.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is up 0.2% to near 99.60.

Hawkish Fed expectations are supported by the Fed’s commitment that it will act to bring inflation down to the 2% target.

Fed chair Warsh strikes more hawkish tone on inflation path

Analysts at Rabobank note that Fed Chair Kevin Warsh “appeared to rebuild some of his credibility as an inflation fighter” in his first address to the annual Jackson Hole Symposium, emphasising that the Fed still has “work to do” to bring inflation back to its 2% target. They argue that the remarks represent “an important shift” from the communication strategy he has followed since taking office, with Warsh, for the first time as Chair, explicitly voicing dissatisfaction with recent inflation developments.

Rabobank highlights that Warsh also signalled he was open to further rate hikes unless underlying inflation shows a more convincing improvement. As he put it, “We must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do.”

Meanwhile, investors shift their focus to the United States (US) ISM Manufacturing PMI data for August and the US JOLTS Job Openings data for July, which will be published at 14:00 GMT.

On the Eurozone front, the preliminary Harmonized Index of Consumer Prices (HICP) data for August comes in higher at 3.3% Year-on-Year (YoY), as expected, against 2.9% in July. The core HICP growth cooled down to 2.4%, while it was expected to remain steady at 2.5%.

EUR/USD Technical Analysis

In the four-hour chart, EUR/USD trades at 1.1594, keeping a bearish near-term tone as it holds beneath the 20-period exponential moving average (EMA) at 1.1618. The pair is capped by this short-term EMA resistance, while the Relative Strength Index (RSI) at 36 stays below neutral, hinting at persistent downside pressure rather than an oversold condition.

On the topside, immediate resistance is defined by the 20-period EMA at 1.1618, which would need to be reclaimed to ease the current bearish bias and allow for a more sustained recovery. Looking down, the 1.1580 level is expected to act as a key support area.