EUR/USD Trapped Between Key Moving Averages as Hawkish Feds and ECB Dominate

The EUR/USD pair is trapped in a 'symmetric hawkish standoff' between two key moving averages, according to an analysis of the currency market. The 100-day simple moving average at 1.1572 and the 200-day moving average at 1.1632 are acting as support and resistance levels for the pair.

The US Dollar Index is up 0.2% near 99.60, outperforming across the board as traders price in a tightening cycle from the Federal Reserve. The CME FedWatch puts a 25 basis point hike at the September 15-16 FOMC meeting at 66.4%, against 33.6% for a hold.

The eurozone flash HICP for August came in at 3.3% year over year, up from 2.9% in July and matching consensus, with the monthly rate accelerating to 0.4% from 0.2%. However, the core print is what cut the euro, as core HICP eased to 2.4% from 2.5%, below the 2.5% consensus.

The market read this combination as a justification for a single ECB hike, followed by a pause in tightening. The swaps curve has virtually fully priced a 25 basis point ECB increase to 2.50% at the September 10 meeting, along with a total of 60 basis points of tightening over the next twelve months.