EUR/USD Price Forecast: Corrects further as US Dollar extends recovery

The Euro (EUR) trades marginally lower against the US Dollar (USD) on Tuesday, extending its corrective move from the four-day high of 1.1711 to near 1.1655 during the European trading session. The major currency pair comes under pressure as the US Dollar recovers further amid caution ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for July and the outcome of the Jackson Hole Symposium. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 99.07. Financial market experts believe that while caution ahead of key events has offered some ground to the US Dollar, there is no reflection of a change in trend for the currency. USD upside seen near term even as broader trend stays under pressure Strategists at Scotiabank highlight that “calendar and event risk this week is significant,” and argue that the backdrop creates “the potential for some moderate gains in the USD broadly in the short run” as investors move to pare back positioning. However, they caution that the broader technical backdrop remains fragile, noting that “technical trends remain bearish and while oscillator signals are showing some moderation in the dollar decline, no reversal is evident at this point.” Meanwhile, the outlook of the Euro remains broadly firm on expectations that the European Central Bank (ECB) will raise interest rates next month. Eurozone resilience underpins September ECB hike expectations Analysts at Nomura continue to look for a September move from the ECB, stating that they “expect the ECB to raise rates in September,” and arguing that “today’s activity data may ease concerns from more dovish policymakers that are keen not to restrict activity more than necessary.” They also highlight the latest ECB Consumer Expectations Survey as a key gauge of medium-term price pressures, noting that “in the July survey, despite the re-escalation of the Iran war in July, 3y ahead median inflation expectations continued to normalise and declined by 0.1pp to 2.7%, whereas 5y ahead median inflation expectations were unchanged at 2.4%.” EUR/USD trades at around 1.1654, maintaining a bullish near-term bias as it holds above the 20-day Exponential Moving Average (EMA) at 1.1577, suggesting buyers remain in control The Relative Strength Index (14) hovers in firm positive territory near 67, hinting at strong but not yet extreme upside momentum. On the downside, initial support is the June 15 high at 1.1622, followed by the 20-day EMA at 1.1577. Looking up, the pair needs a decisive break above the August high at 1.1711 to resume the uptrend. On the upside, the major hurdle for the pair will be the May high near 1.1800.