EUR/USD Price Forecast: Softens below 1.1150, bearish bias intact below key moving averages
- EUR/USD declines to around 1.1120 in Wednesday’s early European session.
- Negative outlook of the pair remains intact below the 100-day SMA; temporary rebounds cannot be ruled out amid oversold conditions.
- The first downside target emerges at 1.1100; the immediate resistance level is seen at 1.1205.
The EUR/USD pair trades on a weaker note near 1.1120 during the early European trading hours on Wednesday. Markets could turn cautious later in the day ahead of the Federal Reserve (Fed) interest rate decision on Wednesday. On Thursday, the European Central Bank (ECB) policy meeting will be in the spotlight.
Markets expect the Fed to hold benchmark rates steady in a range of 3.75%-4.00% when it releases its decision Wednesday. Fed funds futures are pricing in an implied 92.8% chance the Federal Open Market Committee (FOMC) will keep its policy interest rate on hold, according to the CME FedWatch tool. The likelihood of a US rate hike in December stands at 84.4%.
"The Fed doesn't need to hike today to move markets," said Chris Weston, head of research at Pepperstone Group in Melbourne. "It simply needs to change the perceived probability of hiking in December.”
On the Euro’s front, the ECB is likely to leave its key interest rates unchanged at its upcoming meeting on Thursday following a 25 bps hike in September. Meanwhile, high energy costs, the volatility in French government bonds and worries about France's fiscal position might cap the upside for the shared currency in the near term.
Dollar strength weighs on EUR while Wall Street edges higher
Analysts at Commerzbank report a mixed but generally constructive tone across US markets, noting that “the DJIA held steady, while the S&P500 and the Nasdaq Composite Index rose 0.6% and 1.2% respectively.” In FX, they highlight renewed support for the greenback as “the Dollar Index rose 0.4% to 102.37,” with the stronger Dollar pressuring the single currency: “EUR-USD fell 50 pips to 1.1120.”
Warsh cautious on crisis scars but upbeat on investment and AI, keeping Dollar bulls alert
Fed Chair Warsh’s remarks score slightly below the established baseline on the FXS Speechtracker, with 5.6 versus a historical 6.1, reflecting a mildly less impactful tone despite broadly steady messaging. The admission of being “over-scarred” by the Global Financial Crisis underscores a structurally cautious bias on financial stability, even as Warsh highlights a structural growth and investment surge and refuses to pre-commit on the October and December meetings. Emphasis on AI as a near-term demand driver and a future support for data-dependent policy suggests openness to productivity-led upside risks, but with acknowledged uncertainty on employment.
The FXS Fed Sentiment Index was unchanged on the speech, holding at 127.51, a firmly hawkish reading despite the flat 0.00-point move. This indicates that, while the latest comments did not shift the hawkish dial further, the overall policy backdrop remains supportive for the Dollar in the context of elevated Fed hawkishness captured by the FXS Fed Sentiment Index and the FXS Speechtracker.
Technical Analysis: EUR/USD keeps a bearish vibe amid oversold conditions
In the daily chart, EUR/USD extends a clear bearish phase with spot holding below the 20-day Bollinger simple moving average and well under the 100-day moving average, both of which now reinforce a downside bias. Price is also lodged beneath the lower Bollinger band, highlighting persistent selling pressure, while the Relative Strength Index (14) around 30 signals oversold conditions that could slow, but not yet reverse, the prevailing decline.
On the downside, the 1.1100 psychological level acts as an initial support level for the major pair. Any follow-through selling below the mentioned level would expose the May 12, 2025 low of 1.0951. The broader bearish outlook is likely to persist while EUR/USD remains entrenched below this longer-term barrier.
On the topside, initial resistance level appears at the 20-day Bollinger midline around 1.1205 and the upper boundary of Bollinger band near 1.1280. A decisive break above the mentioned level could pave the way to the 100-day moving average at 1.1440.
(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.
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