Interest Rate Forecast: Fed Rate Hike Risks Support US Dollar as EURUSD Eyes 1.12

The pair could recover from the grounds if the ECB hikes rates in September, while the Fed holds. The latest surge in energy prices has led markets to factor in two more rate hikes by the ECB this year. The ECB would have to deliver a more robust policy response to move the eurozone closer towards the U.S. interest rate. But if eurozone growth is weak, EURUSD may struggle to rally significantly.

EURUSD Technical Outlook Points to 1.12 Support

The strong rally in the US dollar index since January 2026 has pushed EURUSD down toward support at 1.1375. EURUSD has been consolidating around this support level since the June 2026 lows and is looking for its next direction.

If EURUSD breaks below this support level, it may put further pressure on the pair and push it toward 1.1260. The 1.1260 level remains the key support, defined by support line of the broadening wedge pattern. This support line extends from the May 2025 low.