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- EUR/USD posts modest gains near 1.1620 in Tuesday’s early Asian session.
- Germany’s CPI inflation rose to 2.9% YoY in August.
- Traders raise bets on a rate hike after Fed’s Warsh remarks on curbing inflationary pressure.
The EUR/USD pair trades with mild gains around 1.1620 during the early Asian session on Tuesday. The US Dollar (USD) strengthens against the Euro (EUR) despite a hawkish Jackson Hole speech from Federal Reserve (Fed) Chair Kevin Warsh. Traders will take more cues from the preliminary reading of the Eurozone August Harmonized Index of Consumer Prices (HICP), which is due later on Tuesday.
Data released by the German statistics office Destatis on Monday showed that the country’s Consumer Price Index (CPI) inflation climbed to 2.9% YoY in August from 2.8% in July. This figure came in line with the market consensus and registered a third consecutive monthly increase. On a monthly basis, the CPI rose 0.2% in August, compared to 0.8% in the previous reading, softer than the 0.3% expected.
The European Central Bank (ECB) policymakers have lifted borrowing costs once and are likely to hike again at the upcoming policy meeting on September 10. Traders are betting on monetary policy being tightened further still next year.
Across the pond, hawkish remarks from the US central bank might underpin the Greenback and cap the upside for the major pair. Traders increased their bets on a September rate hike after Warsh said the Fed will “have work to do” if policymakers are not confident that underlying inflation is returning to its 2% target.
Warsh clarifies policy stance after July FOMC ambiguity
Strategists at Scotiabank note that Kevin Warsh used his Jackson Hole appearance to recalibrate market perceptions of his policy stance. In their words, Warsh “used his Jackson Hole comments to correct the impression of evasiveness and opacity that characterized his remarks following the July FOMC,” helping to address concerns over communication and restore a clearer policy signal ahead of the September FOMC.
Technical Analysis: EUR/USD
In the daily chart, EUR/USD trades at 1.1622. The pair holds a constructive bias as spot advances above the 20-period Bollinger middle band at 1.1600 and the 100-day simple moving average (SMA) near 1.1570, suggesting a supportive underlying structure after the recent recovery from the mid-1.15s. Momentum is positive, with the Relative Strength Index (14) around 57, which hints at persistent buying interest without yet reaching overbought conditions.
On the topside, immediate resistance aligns with the upper Bollinger band at roughly 1.1713, where gains could start to face profit-taking. On the downside, initial support is located at the Bollinger middle band at 1.1600, followed by the 100-day SMA around 1.1570; a deeper pullback would expose the lower Bollinger band near 1.1488 as a stronger demand area.
