EUR/USD Steady Above 1.1070 as Traders Await CPI and Fed Clues

EUR/USD Holds Gains as Traders Position Ahead of U.S. CPI

The euro traded around 1.1073 in early European hours, extending a narrow consolidation after last week’s climb from the 1.0970 area. Monday’s session saw the pair oscillate between 1.1065 and 1.1088, holding above the 50-hour moving average and showing resilience despite a firmer U.S. dollar index hovering near 101.50. Euro buying remains supported by the recent shift in U.S. interest rate expectations, with traders now pricing in an 87% probability of a September Federal Reserve rate cut

Macro Drivers: Diverging Central Bank Paths

The Federal Reserve’s cautious tone after the softer July payrolls report has increased bets on U.S. policy easing. In contrast, the European Central Bank maintains a tighter stance, with officials signaling that inflation remains above target and wage growth still warrants vigilance. This policy divergence has narrowed U.S.–Eurozone yield spreads, reducing dollar appeal and providing a tailwind for the euro

Upcoming U.S. CPI and PPI: Market-Defining Risk Events

The focus now turns to Tuesday’s CPI and Thursday’s PPI. A core CPI reading matching expectations at 0.2% MoM and 2.8% YoY could keep the Fed on track for a September cut, likely pushing EUR/USD toward 1.1120–1.1150. However, a hotter inflation print risks reviving dollar demand and pressuring the pair back toward 1.1030 and the 1.1000 psychological level

Technical Structure: Key Levels in Play

Immediate support sits at 1.1060, followed by 1.1035–1.1040 and the critical 1.1000 base. A break below 1.1000 would expose 1.0970, the low from August 2, and potentially 1.0935. Resistance is clustered at 1.1090, 1.1120, and 1.1150, with a decisive daily close above 1.1150 opening the door to 1.1200–1.1220

Positioning and Market Flows

CFTC data shows net euro long positions holding near multi-month highs, indicating that speculative accounts are still leaning bullish. However, the recent slowdown in momentum signals that upside progress may be more measured unless incoming U.S. inflation data aligns with dovish Fed expectations

Cross-Asset and Correlation Signals

U.S. 10-year Treasury yields at 4.27% are capping EUR/USD’s topside, while a softer dollar against other G10 currencies, particularly GBP and CHF, suggests broader USD fatigue. Equity markets are steady, with the S&P 500 futures slightly higher, hinting at a modestly risk-on backdrop that typically benefits the euro

Geopolitical and Trade Backdrop

Lingering trade tensions between the U.S. and China remain a wildcard, but the absence of new tariff escalations in recent days has reduced safe-haven flows into the dollar. Meanwhile, Eurozone economic releases remain light, with traders awaiting next week’s German ZEW sentiment data for fresh growth cues

Short-Term Bias and Strategy

As long as EUR/USD holds above 1.1030–1.1060, the bias remains cautiously bullish, with pullbacks likely to attract dip buyers ahead of CPI. A sustained move through 1.1120 would strengthen the bullish case toward 1.1150–1.1200, while a break below 1.1000 would shift bias to neutral

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