EUR/USD Price Forecast: Holds gains above 1.1150, but remains technically bearish under 100-day SMA
- EUR/USD gathers strength to around 1.1175 in Tuesday’s early European session.
- The pair keeps a bearish vibe under 100-day SMA, but temporary rebound cannot be ruled out amid oversold conditions.
- The first upside target to watch is 1.1243; the initial support level is seen at 1.1105.
The EUR/USD pair holds positive ground near 1.1175 during the early European trading hours on Tuesday. Nonetheless, hawkish Federal Reserve (Fed) expectations and higher US Treasury bond yields could underpin the US Dollar (USD) and act as a headwind for the major pair.
Cleveland Fed President Beth Hammack said on Monday that tighter monetary policy may be needed to contain inflation in order to prevent an inflationary mindset from becoming entrenched in the economy.
Traders put the probability of rates remaining unchanged at the next meeting at more than 80.6%, while the chance of an increase at the December policy meeting was nearly 84.7%, the CME FedWatch Tool showed.
The key US inflation reports will be the highlight later this week, as they could provide further direction on the Fed’s policy path. The US Consumer Price Index (CPI) inflation report will be published on Wednesday, followed by Producer Price Index (PPI) and Retail Sales data on Thursday.
The headline CPI is expected to show a rise of 3.7% YoY in September, versus 3.4% prior. The core CPI is projected to show an increase of 2.5% YoY in September, compared to 2.4% in August. Any signs of hotter inflation in the US could reinforce the US central bank's decision to maintain a restrictive monetary policy stance to contain persistent price pressures.
Euro under pressure as French budget standoff keeps EUR/USD bias bearish
Analysts at ING highlight that the French government’s latest budget proposal, which includes “€43bn in new savings,” is due to be debated in parliament this week, but they note that “consensus seems to expect that this will make little progress.” ING adds that the government may ultimately have to “pass this budget by decree,” with parliamentary protagonists likely to “avoid trying to bring down the government, which would make the French debt crisis worse than it already is.” The bank cautions that “this is hardly a euro positive, however.”
Against this backdrop, ING points out that “speculators and the FX options market remain quite bearish on EUR/USD currently, although positioning is starting to get a little stretched.” In their view, “barring a big US policy misstep, which again questions investors' long dollar exposure, the macro story remains EUR/USD bearish,” and for the near term “a further dip towards 1.1100/1120 looks more likely.”
Hammack leans hawkish as Fed rhetoric flags risk of inflationary mindset
Fed’s Hammack delivers a notably more hawkish tone, with the 8.4/10 FXS Speechtracker score standing well above the 7.5/10 historical average, underscoring a stronger bias toward tighter policy relative to the established baseline. The emphasis on the need for higher interest rates, a restrictive stance to achieve 2% inflation, and concern that an inflationary mindset is becoming ingrained—amid broad, demand-driven price pressures and “neutral” financial conditions—signals a preference for swift, smaller rate moves to reinforce tight monetary policy. Hammack’s focus on clarifying the Fed reaction function and warning that firms are planning price hikes beyond cost increases highlights a deliberate effort to re-anchor expectations and keep the Dollar supported by a higher-for-longer rate narrative.
The FXS Fed Sentiment Index rose by 0.59 points to 138.92, reinforcing that Fed communication remains firmly in hawkish territory well above the neutral 100 mark. This incremental uptick, aligned with the elevated FXS Speechtracker score, suggests that markets should continue to price a bias toward tighter policy, which is typically supportive for the Dollar against the Euro and Yen.
Technical Analysis: EUR/USD retains a negative bias amid oversold conditions
In the daily chart, EUR/USD keeps a bearish near-term bias as spot holds below the 100-day simple moving average (SMA) and the Bollinger middle band. Price is consolidating closer to the lower Bollinger band support than to overhead levels, while the Relative Strength Index (14) at 25.5 sits in oversold territory, hinting that downside pressure persists but that the sell-off is becoming stretched.
On the topside, initial resistance is located at the October 9 high of 1.1243, en route to the Bollinger middle band near 1.1325, and then the 100-day SMA at 1.1485. A stronger cap emerges at the upper boundary of Bollinger band around 1.1540.
On the downside, the lower Bollinger band at 1.1105 serves as the next key support level. A desicive break below this level would expose further weakness toward the May 21, 2025 low of 1.1050, followed by the 1.1000 psychological level. Any follow-through selling below the mentioned level could expose the May 12, 2025 low of 1.0951.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Recommended Articles
