EUR/USD price holds above $1.16 ahead of U.S. CPI data

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EUR/USD price action steady near 1.16 ahead of CPI

Highlights

- EUR/USD is consolidating between 1.1595 and 1.1666 ahead of U.S. CPI data.

- Break above 1.1666 could target 1.1720, while a drop below 1.1595 risks 1.1543.

- Policy divergence between the ECB and Fed keeps the pair range-bound for now.

This range has created a short-term decision zone as traders weigh the upcoming U.S. inflation data and its implications for Federal Reserve policy. A descending trendline from late July's 1.1787 peak continues to cap price action. So far, selling pressure has absorbed support at 1.1595 to 1.1600, preventing a deeper slide. Until this shelf breaks, the pullback from 1.1700 is viewed more as a consolidation phase than the start of a fresh downtrend.

Technical signals point to pivotal resistance

The four-hour chart shows EUR/USD stalled under the Parabolic SAR reading of 1.1666, with the dotted markers still above price, signaling sellers remain in control. A close above 1.1666 would reverse that bias, opening the way for a retest of 1.1700 and potentially the 1.1720 zone, where prior highs overlap the 78.6% retracement.

EUR/USD price dynamics (Source: TradingView)

Momentum indicators are balanced. The four-hour RSI is near 48.5, with its smoothing line around 53.4, reflecting a market in equilibrium. An RSI push above 55 alongside a breakthrough at 1.1666 would confirm renewed bullish momentum, while a drop under 45 coupled with a break of 1.1595 would tip control toward sellers. On the downside, 1.1543 marks the next target, aligning with the 38.2% retracement and prior reaction lows from early August.Macro context underpins the current standoff. Markets are digesting a potential ceasefire track in Ukraine, a 90-day extension of the U.S.–China tariff truce, and the July U.S. consumer price index release due this week. Consensus sees headline CPI edging higher, with core inflation near 3%. A stronger reading could dampen September rate-cut expectations, boosting the dollar and pressuring EUR/USD toward 1.1543. A softer print, particularly in core CPI, could ease yields and lift the euro above 1.1666.

Policy divergence keeps range intact

The European Central Bank paused rate changes in July after eight cuts in the past year, signaling a slower pace ahead. Eurozone GDP grew 0.1% in Q2, with inflation near the ECB’s 2% target, offering no strong catalyst for policy tightening. In contrast, recent U.S. data including softer payrolls and weaker services activity has tilted market expectations toward the Fed cutting rates next.

This divergence leaves EUR/USD with two-way risk. A dovish Fed shift could support euro gains, but lingering trade risks including the possibility of new U.S. tariffs on European goods may cap rallies into the high 1.17s. Political developments such as the upcoming Trump–Putin meeting could also sway sentiment if they influence European energy security. In the near term, traders are watching the 1.1595 to 1.1666 corridor for a breakout. A confirmed move above the upper boundary could drive the pair toward 1.1720 and eventually 1.1780. Conversely, a close below 1.1595 could trigger a slide to 1.1543 and possibly 1.1486. Until a catalyst emerges, the range-bound structure is likely to persist.

In earlier coverage, we highlighted 1.17 as a key pivot following July’s rally from 1.1393. The current range-bound behavior is consistent with that view, as the pair remains in a holding pattern awaiting a fundamental trigger. The upcoming CPI release may provide the volatility needed to resolve this consolidation.

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