EUR/USD Price Forecast: Euro Holds $1.164 While Traders Await Powell’s Fed Signal

EUR/USD Consolidates Around $1.164 as Traders Brace for Powell

Technical Positioning of EUR/USD

The euro-dollar pair (EUR/USD) is trading defensively near 1.164, unable to sustain last week’s momentum when it briefly touched 1.1720. The breakdown from a rising channel that originated from the August low at 1.1393 is clear, with moving averages now layered overhead. The 20-EMA at 1.1661, 50-EMA at 1.1656, and 100-EMA at 1.1645 all cluster above spot, creating resistance that sellers are defending. The 200-EMA near 1.1627, coinciding with the 61.8% Fibonacci retracement at 1.1636, forms the pivot band that bulls must hold to prevent a steeper decline. If that zone breaks, the next magnet lies at 1.1590, followed by 1.1543. On the topside, reclaiming 1.1700–1.1720 opens scope to 1.1780.

Federal Reserve Expectations and Powell’s Role

The September FOMC meeting remains central to dollar direction. Fed funds futures now price an 85–86% probability of a 25 bp cut, down from full certainty a week earlier after July’s Producer Price Index jumped at the fastest monthly pace since 2022. The University of Michigan’s survey also revealed rising inflation expectations, with the one-year outlook climbing to 4.9% from 4.5%. This shift has reduced bets on a larger 50 bp cut. Against this backdrop, Powell’s Jackson Hole speech will determine whether EUR/USD can recover above 1.1700 or slip toward the 1.15 handle. A dovish Powell would weaken the dollar, while emphasis on patience risks driving the pair toward 1.1590 and 1.1540.

Geopolitical Influence on EUR/USD

Geopolitics are acting as a swing factor. U.S. President Trump’s push for a trilateral peace summit involving Zelenskyy and Putin lifted optimism across Europe, helping the euro resist deeper losses. NATO Secretary General Mark Rutte described the talks as “very successful,” while Trump floated U.S. air support as part of possible security guarantees. At the same time, Moscow signaled caution, with Foreign Minister Sergey Lavrov stressing talks must be prepared “gradually.” Should diplomacy advance, risk sentiment would likely lift EUR/USD, while stalled negotiations could renew demand for the U.S. dollar as a safe haven.

Eurozone Macro and Inflation Pressures

Eurozone data offered mixed signals. German Producer Price Index fell 1.5% YoY in July, the fifth consecutive monthly decline, primarily on weaker energy prices. Month-on-month, PPI slipped 0.1%, underscoring that inflationary pressures in Europe are cooling. With the ECB already delivering eight consecutive rate cuts earlier this cycle and now on hold with 92% probability of no change in September, the policy divergence with the Fed is critical. If Powell holds a hawkish tone, the divergence widens in favor of the dollar; if not, the euro could catch a reprieve.

Short-Term Market Drivers for EUR/USD

The Dollar Index (DXY) has oscillated between 97.90 support and 98.65 resistance, last trading at 98.27. RSI at 58 keeps momentum bullish for the greenback. In U.S. housing, starts rose 5.2% to 1.428M, but permits fell 2.8% to 1.354M, showing uneven strength. For traders in EUR/USD, the immediate technical map remains well defined: 1.1627–1.1636 as pivot, 1.1590–1.1540 as next support, and 1.1700–1.1720 as resistance.

Trading Setups and Market Sentiment

Several strategies align with current ranges. A long entry near 1.1570 support offers upside toward 1.1720, with stop under 1.1500. Conversely, fading rallies near 1.1730 with targets at 1.1500 align with broader downside momentum. The 14-day RSI trends lower, MACD also shows bearish bias, and price trades below trendline resistance. Unless EUR/USD reclaims 1.1700, the path of least resistance remains downward.

Final Positioning: Buy, Sell, or Hold?

EUR/USD sits at a crossroads. Technicals lean bearish with resistance stacked overhead and Powell’s speech looming as a decisive trigger. The case for euro strength relies on dovish Fed signals or a diplomatic breakthrough in Ukraine. Without those, downside tests at 1.1590 and 1.1540 appear likely. Verdict: Sell rallies under 1.1700, Buy dips only near 1.1570 with tight risk, Hold above 1.1636 pivot awaiting Powell’s confirmation.

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