On Thursday, the EUR/USD forecast was bullish as the euro rebounded from its nearly three-month low against the US dollar. Meanwhile, market focus shifted to the European Central Bank’s impending rate-setting meeting. 

This shift in attention occurred after US inflation data failed to alter expectations for a Federal Reserve pause in the coming week. Notably, the US consumer price index (CPI) rose by 0.6% last month, marking the most significant increase since June 2022. 

However, core inflation, which is of greater concern to the Fed as it excludes food and energy prices, registered a year-on-year rate of 4.3% in August, down from 4.7% the previous month.

Consequently, market participants are almost sure the Fed will maintain its interest rates on September 20. 

Nevertheless, the likelihood of a quarter-point rate increase by the end of the year stands at approximately 40%. Concurrently, expectations for a rate hike by the ECB later on Thursday have risen to about 60% probability. This is a notable increase from earlier in the week when it was closer to a coin toss. 

A Reuters report has partly bolstered this shift in sentiment. The report suggests that the European Central Bank anticipates inflation will remain above 3% in its updated forecasts next year, significantly surpassing the 2% target.

EUR/USD key events today

Investors are awaiting major events from the Eurozone and the US, including:

• The ECB monetary policy meeting
• US retail sales.
• US initial jobless claims.
• The US Producer Price Index report

EUR/USD technical forecast: Price pauses between 1.0701 and 1.0775.

(Click on image to enlarge)

EUR/USD 4-hour chart

On the charts, the EUR/USD price has stalled between the 1.0701 support and the 1.0775 resistance levels. At the same time, the price is trading in a bullish channel with defined support and resistance levels. This pause comes after a bearish leg and could lead to another swing to the downside.

A break below the channel support would likely see the price cross below the 1.0701 level to make another bearish leg. However, if the 30-SMA or the channel support is firm, bulls might retest the 1.0775 resistance.

More By This Author: