The EUR/USD pair struggled to consolidate following an overnight rebound from the 100-day simple moving average (SMA), located around 1.1575–1.1572, which corresponds to a one-and-a-half-week low. During the European session on Tuesday, the pair moved lower and is currently trading below 1.1600, down nearly 0.50% on the day amid moderate US dollar strength.

Traders are exercising caution while awaiting preliminary data on the eurozone Harmonised Index of Consumer Prices (HICP).

Economic forecasts point to an increase in eurozone inflation in August, which in turn makes a September rate hike by the European Central Bank (ECB) almost inevitable. These expectations were supported by German Consumer Price Index (CPI) data, which rose to 2.9% in August from 2.8% in the previous month. Moreover, ECB Executive Board member Isabel Schnabel expressed confidence in the need for another rate hike, although the market reaction to this report is likely to be more subdued.

Meanwhile, during the North American session, attention should be paid to US economic data, including the ISM Manufacturing PMI and JOLTS job openings data. In addition, recent remarks by Federal Reserve Chair Kevin Warsh have strengthened expectations of an imminent rate hike, which, together with geopolitical uncertainty, is increasing demand for the US dollar as a safe-haven asset and supporting its recovery after a moderate decline the previous day. This is seen as a significant factor putting downward pressure on EUR/USD.

Nevertheless, dollar bulls may refrain from aggressive action and prefer to wait for the release of the important monthly US employment data, known as the Nonfarm Payrolls (NFP) report, which will be published on Friday. Despite this, fundamental factors may continue to provide support for the dollar, and any intraday recovery in EUR/USD is likely to encounter selling pressure.

From a technical perspective, if the price fails to hold above the 100-day simple moving average (SMA), a break below it would be viewed as an important signal for the bears. Under this scenario, spot prices could decline to 1.1522, followed by the psychological level of 1.1500. On the other hand, the pair will encounter resistance at the 9-day EMA, followed by the 200-day SMA and then 1.1650, above which the bulls would have room to advance further. As long as the oscillators remain in positive territory, the bulls still have a good chance of regaining control. A daily close above the 1.1700 barrier would be required to fully ease the current downward pressure.