EUR/USD Price Forecast: Decent contention emerged around 1.1550
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UPGRADE- EUR/USD extends its bounce north of the 1.1600 barrier on Wednesday.
- The US Dollar remains on the back foot in the area of weekly lows.
- The better tone in the risk complex and Fed rate cut bets prop up the pair.
EUR/USD extended its recovery on Wednesday, climbing back above 1.1600 and notching a second straight day of gains.
The pair’s uptick comes as the US Dollar (USD) loses traction, even with Treasury yields rebounding modestly across the curve. Renewed jitters over US–China trade tensions kept investors on edge, while traders stayed cautious ahead of comments from Federal Reserve (Fed) officials.
In the meantime, the US Dollar Index (DXY) added to Tuesday’s pullback, slipping again and testing the 98.70–98.60 region.
Trade jitters resurface
Markets got a small dose of optimism after Treasury Secretary Scott Bessent said President Trump still plans to meet Chinese leader Xi Jinping in South Korea later this month. The meeting could mark a brief pause in what had looked like another flare-up in trade tensions.
Just a few days earlier, sentiment had soured after China announced new restrictions on rare earth exports, a move that prompted Trump to threaten triple-digit tariffs on Chinese goods. That exchange reignited fears of a full-scale trade war between the world’s two biggest economies.
Since then, both sides have tried to calm markets. Bessent and China’s Commerce Ministry pointed to ongoing communication between their teams, hinting there’s still room for progress and a chance to extend the current tariff truce.
Central banks stay in watch mode
Over in the US, the Federal Reserve (Fed) lowered its interest rates by 25 basis points on September 17. The decision reflected softer labour data but also acknowledged that inflation remains “somewhat elevated.”
The updated dot plot leaned dovish, signalling around 50 basis points of additional easing before year-end and smaller moves through 2026–27. Growth was nudged slightly higher to 1.6%, unemployment stayed at 4.5%, and inflation forecasts were unchanged.
Not everyone was on board: incoming governor Stephen Miran had argued for a half-point cut but couldn’t convince the rest of the committee.
At his press conference, Chair Jerome Powell pointed to slower job creation and weaker household spending, with headline PCE inflation at 2.7% and core at 2.9%. He noted that tariffs were keeping some goods prices sticky, even as services inflation cools. Overall, Powell suggested the Fed might be edging closer to a neutral stance rather than kicking off a major easing cycle.
The September FOMC Minutes backed that idea: policymakers are open to more cuts if needed but aren’t in a hurry. Most supported the quarter-point move, though some flagged concerns about slower hiring and easing price pressures.
Earlier this week, Powell reiterated that fewer firms are hiring, which could point to cracks in the labour market. He said the Fed would keep taking things “one meeting at a time,” weighing softening employment data against inflation that remains well above target.
The ECB takes a cautious line
The European Central Bank (ECB) also kept a steady hand at its September meeting, leaving policy unchanged and sticking to its meeting-by-meeting approach. Officials said inflation should gradually return to the 2% target, with core inflation seen averaging 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde said policy is in “a good place,” noting that risks are balanced for now and future decisions will depend entirely on new data.
In fact, Accounts from the ECB’s September meeting reflected a similar tone: cautious but not gloomy. Policymakers sounded slightly more upbeat about euro area growth and saw no urgency for further easing, even with lingering risks from US tariffs.
Investors turning careful on the Euro
Market positioning suggests traders are becoming more guarded toward the EUR. With Commodity Futures Trading Commission (CFTC) data still delayed by the US government shutdown, the most recent numbers as of September 23 showed net long positions on the EUR falling to their lowest since July, alongside a reduction in net shorts among institutional investors.
Technical panorama
EUR/USD’s downside momentum faltered around 1.1550 so far.
Extra declines could prompt the pair to retest the August valley at 1.1391 (August 1), prior to the weekly floor at 1.1210 (May 29), which remains bolstered by the proximity of the critical 200-day SMA.
On the flip side, the continuation of the recovery faces an interim hurdle at the 55-day SMA at 1.1678, ahead of the October ceiling at 1.1778 (October 1), and the 2025 high of 1.1918 (September 17).
Meanwhile, the pair’s near-term outlook should remain unchanged as long as it trades above the 200-day SMA at 1.1240.
Momentum indicators point to extra pullbacks in the short term: the Relative Strength Index (RSI) bounced to nearly 45, still favouring further weakness. In addition, the Average Directional Index (ADX) near 19 suggests the current trend might be gaining impulse.
EUR/USD daily chart
Looking for a spark
EUR/USD could see a few more short-lived recoveries, but a real breakout still needs a stronger push. A softer tone from the Fed, fading appetite for US assets, a steady approach from the ECB, or fresh progress in trade negotiations might finally tip sentiment in favour of the European currency and give the pair room to breathe.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
- EUR/USD extends its bounce north of the 1.1600 barrier on Wednesday.
- The US Dollar remains on the back foot in the area of weekly lows.
- The better tone in the risk complex and Fed rate cut bets prop up the pair.
EUR/USD extended its recovery on Wednesday, climbing back above 1.1600 and notching a second straight day of gains.
The pair’s uptick comes as the US Dollar (USD) loses traction, even with Treasury yields rebounding modestly across the curve. Renewed jitters over US–China trade tensions kept investors on edge, while traders stayed cautious ahead of comments from Federal Reserve (Fed) officials.
In the meantime, the US Dollar Index (DXY) added to Tuesday’s pullback, slipping again and testing the 98.70–98.60 region.
Trade jitters resurface
Markets got a small dose of optimism after Treasury Secretary Scott Bessent said President Trump still plans to meet Chinese leader Xi Jinping in South Korea later this month. The meeting could mark a brief pause in what had looked like another flare-up in trade tensions.
Just a few days earlier, sentiment had soured after China announced new restrictions on rare earth exports, a move that prompted Trump to threaten triple-digit tariffs on Chinese goods. That exchange reignited fears of a full-scale trade war between the world’s two biggest economies.
Since then, both sides have tried to calm markets. Bessent and China’s Commerce Ministry pointed to ongoing communication between their teams, hinting there’s still room for progress and a chance to extend the current tariff truce.
Central banks stay in watch mode
Over in the US, the Federal Reserve (Fed) lowered its interest rates by 25 basis points on September 17. The decision reflected softer labour data but also acknowledged that inflation remains “somewhat elevated.”
The updated dot plot leaned dovish, signalling around 50 basis points of additional easing before year-end and smaller moves through 2026–27. Growth was nudged slightly higher to 1.6%, unemployment stayed at 4.5%, and inflation forecasts were unchanged.
Not everyone was on board: incoming governor Stephen Miran had argued for a half-point cut but couldn’t convince the rest of the committee.
At his press conference, Chair Jerome Powell pointed to slower job creation and weaker household spending, with headline PCE inflation at 2.7% and core at 2.9%. He noted that tariffs were keeping some goods prices sticky, even as services inflation cools. Overall, Powell suggested the Fed might be edging closer to a neutral stance rather than kicking off a major easing cycle.
The September FOMC Minutes backed that idea: policymakers are open to more cuts if needed but aren’t in a hurry. Most supported the quarter-point move, though some flagged concerns about slower hiring and easing price pressures.
Earlier this week, Powell reiterated that fewer firms are hiring, which could point to cracks in the labour market. He said the Fed would keep taking things “one meeting at a time,” weighing softening employment data against inflation that remains well above target.
The ECB takes a cautious line
The European Central Bank (ECB) also kept a steady hand at its September meeting, leaving policy unchanged and sticking to its meeting-by-meeting approach. Officials said inflation should gradually return to the 2% target, with core inflation seen averaging 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde said policy is in “a good place,” noting that risks are balanced for now and future decisions will depend entirely on new data.
In fact, Accounts from the ECB’s September meeting reflected a similar tone: cautious but not gloomy. Policymakers sounded slightly more upbeat about euro area growth and saw no urgency for further easing, even with lingering risks from US tariffs.
Investors turning careful on the Euro
Market positioning suggests traders are becoming more guarded toward the EUR. With Commodity Futures Trading Commission (CFTC) data still delayed by the US government shutdown, the most recent numbers as of September 23 showed net long positions on the EUR falling to their lowest since July, alongside a reduction in net shorts among institutional investors.
Technical panorama
EUR/USD’s downside momentum faltered around 1.1550 so far.
Extra declines could prompt the pair to retest the August valley at 1.1391 (August 1), prior to the weekly floor at 1.1210 (May 29), which remains bolstered by the proximity of the critical 200-day SMA.
On the flip side, the continuation of the recovery faces an interim hurdle at the 55-day SMA at 1.1678, ahead of the October ceiling at 1.1778 (October 1), and the 2025 high of 1.1918 (September 17).
Meanwhile, the pair’s near-term outlook should remain unchanged as long as it trades above the 200-day SMA at 1.1240.
Momentum indicators point to extra pullbacks in the short term: the Relative Strength Index (RSI) bounced to nearly 45, still favouring further weakness. In addition, the Average Directional Index (ADX) near 19 suggests the current trend might be gaining impulse.
EUR/USD daily chart
Looking for a spark
EUR/USD could see a few more short-lived recoveries, but a real breakout still needs a stronger push. A softer tone from the Fed, fading appetite for US assets, a steady approach from the ECB, or fresh progress in trade negotiations might finally tip sentiment in favour of the European currency and give the pair room to breathe.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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