EUR/USD is trading near 1.1625 during the early European session, maintaining its position above the 200-period Exponential Moving Average (EMA) at 1.1582 as traders await the European Central Bank’s (ECB) rate decision later today. 

Readers can gain further insight into the subject from Tessoron, who provides a detailed discussion of the macroeconomic and technical dynamics at play.

The pair has reclaimed the 23.6% Fibonacci retracement at 1.16406 after rebounding from recent lows, supported by broad US Dollar weakness as the DXY slipped to a four-month trough near 98.65. 

However, rising Fed rate hike expectations and escalating US-Iran tensions continue to provide intermittent safe-haven support for the Greenback, capping the pair’s upside potential. 

The political landscape in Europe also warrants attention, with the AfD’s victory in Saxony-Anhalt with 44% of the vote adding a layer of political uncertainty to the Euro outlook.

ECB Expected to Hike for a Second Time in 2026

The ECB is widely expected to deliver a 25 bps rate hike at today’s meeting, bringing the deposit facility rate to 2.25%. 

The decision comes after Eurozone inflation accelerated to 3.3% in August, its highest level since September 2023, driven largely by rising energy costs stemming from the Strait of Hormuz conflict. 

The energy shock makes the ECB’s communication particularly important, as continued geopolitical tensions and elevated oil and gas prices could keep headline inflation above target for longer.

A Reuters poll found that 91% of economists expect the deposit rate to reach 2.50% by year-end, while interest rate markets have priced in a more hawkish trajectory, with the terminal rate expected at 3.1% by late 2027. 

Markets are now pricing in two ECB rate hikes in 2026. Traders will closely monitor ECB President Christine Lagarde’s post-decision press conference for guidance on whether the tightening cycle will extend further. 

A clearly hawkish ECB could provide support for the Euro, particularly if paired with softer US inflation data later this week.

US Inflation Data Could Reset the Narrative

Following the ECB decision, attention shifts to US PPI data on Thursday and the August CPI release on Friday. 

Economists at TD Securities expect core CPI to rise 0.19% month-over-month, while annual core inflation is projected at approximately 2.3%. Headline inflation is expected to remain around 3.4% year-over-year. 

TD Securities sees risks to its forecast as skewed to the upside, partly because its projection assumes sizable declines in several tariff-sensitive goods categories.

These reports will be critical in shaping expectations for the next FOMC meeting, where markets currently price a 60% probability of a 25 bps hike. 

A hotter-than-expected inflation print would strengthen the case for tightening, lifting US Treasury yields and potentially reversing recent EUR/USD gains. Conversely, a softer reading could reduce Fed rate hike expectations and provide additional upside potential for the pair.

Technical Analysis

From a technical perspective, EUR/USD holds above the 200-period EMA at 1.1582 on the 4-hour chart and has reclaimed the 23.6% Fibonacci retracement at 1.1625. 

The RSI hovers near 58, just below overbought territory, suggesting steady but not aggressive upside pressure. 

The MACD line remains marginally above zero with a shallow positive profile, confirming that constructive momentum is intact but lacks conviction.

Immediate resistance is located in the 1.1686–1.1710 zone, which remains a key hurdle for bulls. 

A decisive break above this area would expose the 1.1800 psychological level. On the downside, support is anchored at the 200-period EMA at 1.1582, followed by the 1.1500 structural floor. 

A break below 1.1500 would invalidate the recovery structure and shift the near-term bias to bearish.

The Takeaways

EUR/USD remains supported above 1.1600 heading into a potentially volatile session defined by the ECB rate decision and approaching US inflation releases. 

The pair’s near-term direction depends on whether the ECB signals further tightening and whether US CPI confirms or undermines current Fed rate hike pricing. The 1.1686–1.1710 resistance and 1.1582 support define the immediate trading range. 

A clearly hawkish ECB paired with softer US inflation could push the pair toward 1.1800, while a dovish surprise from Lagarde combined with a hot CPI print would likely drive a reversal toward the 1.1500 structural floor. 

The interplay between these two central bank narratives will set the tone for EUR/USD into the final quarter of 2026.