EUR/USD edged up in early Asian trade on Tuesday, hovering around 1.1620–1.1622, even as the US Dollar strengthened against the Euro after a hawkish Jackson Hole address by Federal Reserve Chair Kevin Warsh. Markets are looking to the preliminary Eurozone August Harmonised Index of Consumer Prices due later on Tuesday. In Germany, Destatis reported CPI inflation at 2.9% year on year in August versus 2.8% in July, while the monthly rise slowed to 0.2% from 0.8% and undershot the 0.3% forecast. The European Central Bank has raised borrowing costs once and is seen hiking again at its 10 September meeting, with expectations for further tightening next year.
In the US, rate expectations firmed for September after Warsh said policymakers would “have work to do” if they were not confident underlying inflation was returning to the 2% target. Separately, Scotiabank said his remarks sought to reset perceptions after perceived ambiguity following the July FOMC. On charts, the pair sits above the 20-period Bollinger mid-band at 1.1600 and the 100-day SMA near 1.1570; the RSI (14) is around 57. Resistance is near 1.1713, while support levels include 1.1600, about 1.1570 and 1.1488.
Technical Levels and Price Volatility
As we digest the Eurozone HICP data releasing today, derivative traders should closely watch the immediate support floor for EUR/USD at the 1.1600 level. With the pair currently holding just above this mark at 1.1620, a drop below the 100-day simple moving average at 1.1570 could trigger automated sell stops. Historically, September is one of the most volatile months for the currency pair, averaging a 1.8% absolute monthly shift over the past decade.
Trading Strategies Around Policy Risk Events
With the European Central Bank poised to potentially hike rates on September 10 and Fed Chair Kevin Warsh signaling further tightening, we recommend implementing long volatility strategies. Buying near-the-money straddles expiring in late September allows us to capitalize on sharp swings regardless of the direction. Recent pricing in the options market shows implied volatility starting to creep upward, making premium-buying strategies highly attractive before these key policy decisions.
If the preliminary Eurozone HICP print today comes in hotter than expected, matching Germany’s 2.9% rise, we expect a push toward the upper Bollinger band at 1.1713. Traders looking for directional plays can utilize bull call spreads to target this resistance level while limiting downside risk. Conversely, a failure to hold the 1.1570 support zone would justify buying protective puts targeting the lower Bollinger band near 1.1488.
