FX.co ★ Wiking | EUR/USD

The EUR/USD currency pair is trading lower at 1.1360 in early Tuesday's European session. The Euro (EUR) slides to its lowest level since July 28 against the US Dollar (USD) amid rising US Treasury yields and hawkish comments from Fed policymakers. Speculation about possible Fed rate hikes has risen after policymakers suggested hikes might be necessary to tackle excessively high inflation following September's 0.25% benchmark rate increase. Federal Reserve Bank of Cleveland President Beth M. Hammock said Friday that the risks of higher inflation remain elevated, so monetary policy needs to stay restrictive. Federal Reserve Governor Michael Barr also said that "additional policy changes will be needed to bring down inflation." Now, markets expect almost a 70.3% chance of a quarter-point interest rate hike by the Fed in October, according to the CME's Fed Watch tool. Moreover, traders are almost completely expecting four quarter-point hikes in the next 12 months. Analysts at Societe Generale point to the consistent impact of the Dollar's strength on EUR/USD forecasts for this year. "At the beginning of this year, consensus was expecting a EUR/USD of 1.20. We had 1.14. But now, the consensus has come down to 1.16 while our forecast is 1.15 (I am not happy with that one)," they say, emphasizing the way in which the sentiments have turned in favor of the Dollar. Feedback from client meetings indicates that "The perception we gather from client meetings is that the market is, on balance, much more bullish on the dollar than implied by the forecasts." The bank contends that "high levels of oil and other commodities, strong economic data in the United States, and a cautious outlook on the rest of the world have beaten down any bearish sentiment on the dollar." Looking ahead, the team cautions that the current macro backdrop could soon test key levels, warning that "higher inflation and resilient real-economy data could propel the Dollar Index to a near-2026 high (just 0.7% away) or push EUR/USD to a new low (only 0.5% away)." Cook's tone is marginally more hawkish than usual, with a 7/10 score in FXS speech tracker, slightly above the 6.9/10 average. This is because Cook mentions "continued inflation pressure" amid AI and the Middle East conflict. Despite the acknowledgment that disinflation will occur in the next few years from the productivity brought about by AI, Cook states that the benefits will come too late to help address the inflation pressures currently being experienced, while the labor market is "well positioned" to accommodate an increase in interest rates, even as Cook is highly cognizant of a situation where AI boosts unemployment. The FXS Fed Sentiment Index fell 0.63 points to 146.89, indicating a mild shift toward hawkishness despite the speech's above-baseline inflationary risk tone. Since the FXS Fed Sentiment Index is currently very hawkish, well above 100, the fall suggests the market views Cook's statements as a reiteration of the current restrictive policy stance rather than a step up from the previous position, consistent with the mildly hawkish FXS Speech tracker score.

EUR/USD is bearish in the short term on the daily chart, as it remains below both the 100-day SMA and the Bollinger Middle Band, which act as barriers to potential rallies. The current RSI(14) of 25.6 suggests that while downside pressure remains, the fall may also be stretched in the short term, as it indicates oversold conditions. As for upward momentum, the first level of resistance is 1.1411. A further rise above this level can open the door for a move towards the Bollinger Middle Band at 1.1510 and from there towards the 100-day SMA at 1.1525, and the September 9 high of 1.1654. The higher resistance level is the Bollinger Upper Band at 1.1705. However, from a negative perspective, the current support level coincides with the lower Band at 1.1315. A break of this level could mean price moves toward 1.10, which is the low on 29, 2025, then to 1.1050 for M (the low on 21, 2025), and the 1.000 psychological level.