EUR/USD Price Forecast: Rising US Dollar backs fresh downside leg below 1.1100

• EUR/USD declines to near 1.1138 as the US Dollar outperforms its peers.
• Traders raise hawkish Fed bets as the US core CPI continues to remain elevated.
• ECB’s Klass Knot to replace Preside Christine Lagarde.

The Euro (EUR) is down 0.2% to near 1.1138 against the US Dollar (USD) during the European trading session on Wednesday. The EUR/USD pair is under pressure as the US Dollar (USD) strengthens due to fears that the Federal Reserve (Fed) could follow an aggressive monetary tightening cycle to contain consistently accelerating inflationary pressures.

In the European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, posts a fresh almost four-week high at 102.51.

According to the CME FedWatch tool, financial markets have started pricing in a 50 basis points (bps) interest rate hike in December, following the release of the hotter-than-projected United States (US) Consumer Price Index (CPI) data for October. However, the odds are nominal at around 13.5%.

Strategists at Deutsche Bank said in a note that the “monthly core CPI print for October was above consensus at +0.30% (vs. +0.2% expected).” Deutsche Bank added that “it was the third consecutive month with core CPI at +0.3%, and if you take those three months together, the annualised pace for core CPI is running at +3.75%.” According to the bank, “that’s the fastest pace on that measure since April 2024, so it made it increasingly difficult to dismiss this as a blip.”

The bank also underscores that “meanwhile, the headline CPI numbers were faster still, with monthly headline CPI at +0.35% (vs. +0.3% expected), with the 3-month annualised pace at +5.72%.”

Meanwhile, the regime change at the European Central Bank (ECB) is expected to keep the Euro highly volatile.

ECB succession focus as Klaas Knot signals readiness to act in future crises

Rabobank highlights that Dutch central banker Klaas Knot, a leading candidate to succeed ECB President Christine Lagarde, used a Financial Times interview to underscore the Governing Council’s crisis-fighting credentials, stressing that “If circumstances require it, we will not hesitate to take action.” Analysts note that Knot’s remarks were not about revisiting “50bps rate hikes due to geopolitically driven inflation,” but rather about the opposite scenario, in which Europe faces a future crisis “of a different nature.” In that context, Rabobank points out that Knot “would not rule out developing another, more tailored instrument,” raising the prospect of fresh policy tools should conditions deteriorate again.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1138, extending a soft bearish tone as price holds beneath recent closes while remaining just under the 20-day exponential moving average (EMA) at 1.1200, which now acts as nearby hurdle.

The 14-day Relative Strength Index (RSI) sits around 41, below the neutral 50 line, hinting that downside pressure still prevails even as oversold conditions seen earlier in the month have eased.

On the downside, the recent low of 1.1104 is the immediate support; a break below that level would expose the pair to 1.1000. On the upside, a recovery back toward the 20-day EMA support zone near 1.1200 would be the first sign of stabilization, and sustained trading above that level would be needed to ease the current bearish bias and open the door to a broader corrective bounce.

(The technical analysis of this story was written with the help of an AI tool. Know more.)