FX.co ★ EUR/USD

The EUR/USD pair recently tested the key support level at 1.1603, with the Moving Average Convergence Divergence (MACD) indicator falling significantly below the zero line, limiting the pair's downside potential and preventing the establishment of strong short positions. Market participants are closely watching the expected rise in US inflation data, widely considered a key macroeconomic catalyst for the upcoming meeting. Headline inflation is expected to accelerate, potentially pushing annual inflation into the 3.5% to 3.6% range, driven by increasing pressure from rising fuel and energy costs, while core inflation is expected to remain relatively moderate, closer to 2.5%. This potential divergence is a key focus for market participants, with proponents of a tighter monetary policy pointing to strong overall momentum and domestic demand, while those advocating for a looser monetary policy emphasize the stability of underlying indicators and the absence of a broader twin-twin inflationary feedback loop. For the euro, the underlying monetary policy transmission mechanism remains straightforward and transparent: stronger-than-expected inflation indicators could revive safe-haven demand for the US dollar, potentially putting downward pressure on the EUR/USD exchange rate, while weaker economic data could provide a technical opportunity for a longer-term euro rally. Meanwhile, market observers are also examining complementary indicators, such as the University of Michigan's consumer confidence surveys and inflation expectations, which are closely watched by Federal Reserve officials as they assess long-term price credibility. Given that financial markets currently price in a roughly 70% probability of an interest rate hike, the underlying expectations are unlikely to undergo a major structural revision, except in cases of significant data deviations. This suggests that the immediate reaction following data releases will be characterized by sharp, short-term volatility, rather than a clear trend reversal before the central bank's official meeting. Intraday execution strategies are heavily focused on structural boundaries, primarily concentrating on two distinct buying and selling patterns. In the first buy scenario, if the price pulls back to test the support level of 1.1603, targeting a rise to 1.1627, an entry point will be considered. At this point, long positions will be closed, and a sell position will be opened, targeting a reversal of 30-35 pips, provided the MACD indicator has moved back above the zero line and started to rise. The second buy scenario anticipates a double test of the 1.1591 low, with the MACD indicator in oversold territory. This technical setup aims to remove selling pressure and trigger a corrective bullish reversal to 1.1603 and 1.1627. Conversely, the first sell scenario establishes a sell position after a confirmed break of the 1.1591 level, targeting a rapid decline to 1.1572, supported by a bearish MACD indicator below the zero line. The second sell scenario, on the other hand, hopes to eliminate repeated tests of the 1.1603 resistance level under overbought conditions to capitalize on a corrective pullback towards 1.1591 and 1.1572.