Final answer:
Amazon CloudWatch is the AWS service that helps in identifying underutilized EC2 instances by monitoring their performance and utilization, allowing for cost optimization.
Step-by-step explanation:
The AWS service most suited for identifying underutilized Amazon EC2 instances is Amazon CloudWatch. This monitoring service enables you to collect and track metrics, set alarms, and automatically react to changes in your AWS resources. CloudWatch can be used to monitor EC2 instances and get detailed insights into their performance and utilization. If an instance shows consistently low CPU or network utilization, it could be a candidate for downsizing or termination to reduce costs. Hence, by setting up appropriate CloudWatch metrics and alarms, you can identify underutilized resources and optimize your EC2 fleet for cost efficiency.