EUR/USD Price Steadies at 1.1676 as Traders Await Powell and Euro Inflation Data

EUR/USD Trading Under Tight Technical Range

The EUR/USD (EURUSD=X) pair is navigating a narrow channel after its early August rebound, with the spot price oscillating around 1.1676–1.1710. Despite intraday pullbacks, the structure remains constructive, as the pair continues to respect the rising trendline support at 1.1650, which aligns with both the 50-day EMA at 1.1673 and the 100-day EMA at 1.1651. This confluence builds a strong technical floor, reinforcing the case that euro strength is intact even when the dollar regains temporary footing. Repeated rejections near 1.1724–1.1735 have capped momentum, yet the series of higher lows highlights an underlying bullish bias. A confirmed breakout above 1.1788, the July 24 peak, would expose the psychological 1.1800 and potentially extend toward 1.1830–1.1870, levels not seen since September 2021.

Momentum Gauges Signal Mild Euro Advantage

Momentum is balanced but tilting upward. The 14-day RSI at 51–52 is above the midline, showing stabilization rather than exhaustion. Price action has remained above the 9-day EMA at 1.1664, reflecting short-term strength. Even after a half-percent rally last Friday, demand returned quickly on dips, underscoring that buyers are willing to defend the uptrend. The Fibonacci retracement bands from July’s decline show EUR/USD holding between the 61.8% level at 1.1690 and the 78.6% level near 1.1735, a consolidation zone that often precedes a directional breakout.

Dollar Index Consolidation Adds Uncertainty

The U.S. Dollar Index (DXY) is consolidating around 98.03, moving within a descending triangle defined by resistance at 98.31 and support at 97.98. Technical signals remain indecisive: the 50-EMA at 98.04 and 100-EMA at 98.14 are flat, and the RSI at 49 reflects fading bullish strength. A breakdown under 97.98 could expose 97.63–97.34, creating space for EUR/USD to test the 1.1785–1.1834 band. Conversely, a breakout above 98.31 would add pressure on the euro, possibly forcing the pair back to 1.1596–1.1585, where the 50-day average intersects with the late July trough.

Geopolitics Provide a Backdrop to FX Flows

Markets continue to digest U.S. President Trump’s meetings with Ukrainian President Zelensky and reports of possible engagement with President Putin. Hints of security guarantees for Kyiv and U.S. commitments to new arms purchases provided near-term support for the dollar, but the absence of a concrete ceasefire agreement has kept volatility subdued. For the euro, the easing of geopolitical tensions removes some safe-haven demand from the dollar, leaving the single currency better positioned so long as oil and gas prices remain stable. European natural gas prices have slipped, softening one of the biggest headwinds that drove EUR/USD below parity during the 2022 energy shock.

Macro Data: Eurozone Inflation and PMI in Focus

Inflation across the euro area is expected to settle at the ECB’s 2.0% target, reducing urgency for further rate moves. However, the more critical data will be the August PMI survey, after July surprised to the upside and hinted at a return to growth. A repeat improvement could lift the euro further, while disappointment risks breaking the fragile bullish setup. From the U.S., July retail sales showed 0.3% growth, while the upcoming Jackson Hole Symposium will determine whether Powell endorses the market’s 84% probability of a 25bp cut in September.

Investor Positioning and Volatility Skew

According to Bank of America flow analysis, investors have been positioning for higher EUR/USD through leveraged structures, particularly by selling out-of-the-money calls to fund bullish bets. The one-month option skew has shifted toward euro puts, suggesting that while spot buyers remain active, hedgers are bracing for pullbacks. Historically, after six-month rallies of 14%, the median three-month gain was limited to 0.8%, with a maximum extension of 2.6%. This implies EUR/USD’s upside from here may be capped unless fresh catalysts emerge.

Strategic View and Forward Levels

Major houses remain structurally bullish. Danske Bank maintains a 12-month target of 1.23, recommending fading short-term dollar rallies. Scotiabank highlights the intact multi-month bull trend, keeping EUR/USD in a 1.1650–1.1750 range until resistance is broken. ING echoes that momentum remains in place but acknowledges that Powell may choose caution, delaying confirmation of rate cuts and leaving EUR/USD vulnerable to renewed dollar demand.

Decision: Buy, Sell, or Hold EUR/USD

At 1.1676–1.1710, EUR/USD trades on firm technical footing with solid support clustered between 1.1650–1.1660. The macro environment—Eurozone inflation at target, softer energy costs, geopolitical stabilization, and an 84% chance of Fed easing—argues for a Buy bias on dips above 1.1650, targeting a breakout of 1.1788–1.1800. Failure to hold that zone would downgrade the view to Hold, with risk toward 1.1596–1.1585. The balance of evidence supports a bullish stance, conditional on Powell not surprising markets with hawkish caution at Jackson Hole.

That's TradingNEWS