The EUR/USD currency pair went back up to 1.0170 from Tuesday’s lows near 1.0100.

The EUR/USD stayed close to 1.0150 because investors did not want to make big bets before US macroeconomic data come out. Moreover, interest rates are likely to go up by 75 basis points by the end of the day.

The Fed is likely to raise its policy rate by 75 basis points, even though the markets are leaning toward a 100 bps increase because inflation numbers have been higher than expected. The drop in long-term inflation forecasts in the Consumer Sentiment Survey from the University of Michigan and the disappointing PMI surveys kept the markets from giving a 100 bps raise.

A 75-bps rise shouldn’t come as a surprise. Market players want to know what the interest rates will be in September. The FedWatch Tool from CME Group says that the US central bank is likely to raise its policy rate by 125 bps over the next two meetings. The currency could get stronger if Jerome Powell leaves the door open for a 75 bps move in September.

Fears of a recession are growing, and the housing market is getting worse. This could make the Fed cautious. There could be more selling pressure on the dollar, which would make EUR/USD go up. As the energy crisis in Europe gets worse, the ECB is slow to tighten. Even though the pair went up by 50 bps in July, it won’t quickly go back up.

Conclusion

As long as the pair is below 1.0480, which is a five-month support level, it should stay under pressure.

Should the pair trade below 1.0976, the long-term trend should be down.