EUR/USD records slight increases around 1.1480 during the early Asian trading session on Friday. Easing Treasury yields and a pullback in oil are exerting downward pressure on the US Dollar. ECB policymakers perceive a heightened risk of inflationary pressures. The EUR/USD pair is experiencing modest gains, hovering around 1.1480 in the early hours of the Asian session on Friday. The US Dollar edges lower against the Euro amid lower US Treasury yields and moderating oil prices. Federal Reserve Governor Michelle Bowman is scheduled to deliver remarks later on Friday. The 10-year US Treasury yield decreased by eight basis points to 4.94% compared to the prior session. The action was facilitated by an additional decline in oil prices from their peak levels observed since mid-May.
Although the Fed has provided hawkish expectations at this juncture, it may not increase rates as aggressively as the market anticipates, rendering the Greenback susceptible to any potential disappointment. Fed policymakers anticipate an additional rate hike later this year, followed by a pause in 2027. In contrast, traders are factoring in more than one further increase in 2026 and approximately three additional hikes by the conclusion of 2027. The European Central Bank has opted to increase its key deposit rate by 25 basis points to 2.50%, up from 2.25%, a decision that was largely anticipated by market participants. The central bank reiterated its stance of not pre-committing to additional measures following the second rate increase since the onset of the Iran war. ECB President Christine Lagarde cautioned that the ongoing conflict in the Middle East, along with the latest developments in Russia’s war on Ukraine, will likely maintain headline inflation “well above target,” exceeding the central bank’s 2% objective for a prolonged duration.
Strategists note that the latest euro area inflation data did little to shift the policy narrative, with the “final euro area CPI release offered little in terms of surprise, with headline inflation remaining in the low 3% area and core hovering in the mid-2% range.” Against this backdrop, they highlight that “messaging from the ECB remains hawkish,” and that markets are now “pricing just over 50% chance of a hike in October with a cumulative 36bpts of tightening by December,” reinforcing expectations that policymakers may still deliver additional tightening before year-end. In the daily chart, EUR/USD maintains a bearish near-term outlook as the spot price remains below the 100-day simple moving average and the Bollinger middle band. Price remains positioned slightly above the lower Bollinger band, indicating potential downside pressure.
Meanwhile, the Relative Strength Index (14) at 35.35 is near the oversold threshold, implying that selling momentum persists, though it has not reached an extreme level. On the topside, initial resistance is observed at the 100-day SMA at 1.1550, followed by the Bollinger middle band around 1.1595, with a more substantial cap at the upper Bollinger band near 1.1715. On the downside, immediate support is positioned at the lower Bollinger band at 1.1475, and a sustained breach below this level would likely pave the way for additional declines in the pair.
