EUR/USD edged higher on Tuesday after a small dip the previous day, trading near the 1.1660 area as rising oil prices, climbing bond yields, and heightened Middle East tensions fueled inflation worries in the eurozone. Those concerns have strengthened the case for the European Central Bank to take a more hawkish stance, with markets already widely expecting another twenty-five basis point hike in September following the June move. Euro area long-term sovereign yields are still hovering near multi-decade highs, tracking U.S. yields higher as investors fret about Washington's deficit spending and the Federal Reserve's perceived complacency on stubborn inflation. Scotiabank strategists noted the macro calendar is fairly light this week, with German IFO Business Sentiment data on Tuesday the standout release for the euro. They also flagged that shifts in rate differentials are nibbling at the single currency, with yield spreads pulling back slightly and reducing some of the euro's support as U.S. Treasury yields have climbed over the past week. The dollar, however, remains under broader pressure after the Treasury Department moved to double its long-term bond buyback operations, with reports suggesting Treasury Secretary Scott Bessent could tap nearly a trillion dollars from the Treasury's general account to fund the program. Geopolitics are also heating up, with Washington expanding secondary sanctions on entities doing business with Iran and Bessent warning that a major financial institution could face penalties this week, making it clear China will not get a free pass. Looking ahead, the week is packed with key U.S. events, starting with consumer confidence on Tuesday, followed by the personal consumption expenditure price index on Wednesday and Fed Chair Kevin Walsh's speech at Jackson Hole on Friday. Scotiabank expects a modest dollar recovery is possible in the short term as investors trim positions ahead of these risk events.
EUR/USD is currently trading around the 1.1660 mark, with the moving average setup across multiple timeframes showing a market that remains in a broader uptrend but is dealing with some near-term consolidation after a strong run higher. On the hourly chart, the 50-period Simple Moving Average sits at 1.1680, resting just above the current price and acting as the nearest dynamic resistance barrier, while the 200-period Simple Moving Average is positioned at 1.1615, providing a key support floor that has held during recent pullbacks. The 50 SMA holding above the 200 SMA keeps a golden cross in place on the hourly timeframe, signaling that the longer-term bias still favors buyers even if short-term momentum has cooled. Zooming out to the four-hour chart, the 50-period Simple Moving Average rests at 1.1620, while the 200-period Simple Moving Average sits at 1.1500, both positioned below the current price and climbing in the same direction, reinforcing the bullish medium-term structure. The overlap of the four-hour 50 SMA with the hourly 200 SMA near the 1.1615 to 1.1620 zone creates a reinforced support area that should attract buyers on any dip. Looking at the horizontal levels that exist separately from the moving averages, the first resistance barrier sits at 1.1680, matching the hourly 50 SMA, followed by the 1.1700 round-figure mark and the 1.1720 area. Above that, the next targets are 1.1750 and 1.1780, with the 1.1800 level acting as the ultimate near-term objective. On the support side, the first floor is at 1.1620, matching the four-hour 50 SMA, followed by the 1.1615 level that lines up with the hourly 200 SMA. Below that, the next cushions are at 1.1580 and 1.1550, with the 1.1500 four-hour 200 SMA acting as the ultimate structural floor. For now, the pair is holding its ground, and a daily close above 1.1680 would likely reopen the path toward 1.1750 and beyond, while a break below 1.1615 would signal a deeper pullback toward the lower supports. The upcoming U.S. data and Jackson Hole speech will be the main drivers to watch, as a hawkish Fed surprise could give the dollar a short-term lift, while softer inflation or dovish signals would likely extend the euro's advance.
