EUR/USD Price Forecast: The 200-day SMA holds the downside, for now
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UPGRADE- EUR/USD trades in an inconclusive fashion around 1.1650 on Wednesday.
- The US Dollar seems to have lost some momentum amid rising Fed rate cut bets.
- US Retail Sales expanded more than estimated in November.
EUR/USD seems to have entered some consolidative phase in the last few days, always looking at the US Dollar (USD) for direction and with the upside limited by the 1.1700 region so far.
EUR/USD navigates a tight range midweek, lacking clear direction and mostly orbiting around the 1.1650 zone amid the slightly offered stance in the Greenback.
The move lower in spot also comes amid further decline in US Treasury yields across various maturity periods, while the German 10-year bund yields manage to clinch their second day in a row of gains, albeit modest ones.
The pair’s daily decline owes a lot more to the USD side of the equation than anything Euro-specific. Fresh selling pressure in the Greenback resurface as market participants reshift their attention to the Fed’s independence issue in combination with the likelihood that the Federal Reserve (Fed) could further lower its interest rates in the upcoming months. The latter has been underpinned by the latest US CPI data for December.
That said, the US Dollar Index (DXY) comes under some tepid downward pressure, prompting it to give away part of the recent advance and confront the contention zone around 99.00.
The Fed cuts, but isn’t easing off the brakes
The Fed delivered the December rate cut markets had been expecting, but the real signal came from the tone rather than the action. A split vote and carefully chosen words from Chair Jerome Powell made it clear the Fed isn’t in any rush to keep easing.
Powell reiterated that inflation remains “somewhat elevated” and stressed that policymakers want more convincing evidence that the labour market is cooling without tipping into something uglier. Updated projections barely budged, still showing just one additional 25-basis-point cut pencilled in for 2026, alongside steady growth and only a modest rise in unemployment.
The press conference followed a familiar script: The Fed is happy to wait and watch the data. In addition, Powell ruled out rate hikes as a baseline scenario, but he also avoided giving any hint that another cut is imminent. He pointed to import tariffs introduced under former President Donald Trump as one factor keeping inflation sticky, underlining that some of the pressure is policy-driven.
Minutes released later underlined just how finely balanced the decision was. Divisions inside the Federal Open Market Committee (FOMC) were deep, with some officials favouring pre-emptive easing as the labour market cools and others worried that inflation progress could stall. The takeaway is straightforward: confidence around further cuts is fading, and a pause now looks like the path of least resistance unless inflation improves or unemployment rises more sharply.
The ECB stays calm and comfortable
Across the Atlantic, the European Central Bank (ECB) also stayed on hold at its December 18 meeting, and sounded increasingly at ease with that decision. Small upgrades to parts of the growth and inflation outlook have effectively shut the door on near-term rate cuts.
Recent data have helped steady nerves. Euro area growth has surprised slightly to the upside, exporters have coped better than feared with US tariffs, and domestic demand has softened the blow from ongoing weakness in manufacturing.
Inflation dynamics continue to support the ECB’s stance. Price pressures are hovering close to the 2% target, with services inflation doing most of the heavy lifting, a pattern policymakers expect to persist.
Updated projections still show inflation dipping below target in 2026–27 due to lower energy prices before drifting back toward 2% later on. At the same time, officials flagged the risk that services inflation could remain sticky, as wage growth slows only gradually.
Growth forecasts were nudged higher as well, reinforcing the view that the economy is proving more resilient than feared. As President Christine Lagarde put it, exports remain “sustainable” for now. She again stressed that policy decisions will be taken meeting by meeting and guided by incoming data.
Markets have taken the message on board. Pricing points to barely 5 basis points of easing this year, consistent with an ECB that sees little urgency to move.
Politics clouds the Dollar outlook
The latest pullback in the US Dollar followed reports that the Justice Department could seek to indict Powell over comments he made to Congress regarding cost overruns on a renovation project at the Fed.
Powell described the move as a pretext to gain leverage over interest-rate decisions, something Trump has openly pushed for, and the episode has revived concerns about the Fed’s independence, weighing on confidence in the Greenback.
Adding another layer of uncertainty, President Trump said this week that candidates to succeed Powell could be announced in the coming weeks.
Positioning tilts back toward the Euro
Speculative positioning continues to lean in favour of the euro (EUR), with momentum starting to rebuild.
According to Commodity Futures Trading Commission (CFTC) data for the week ending January 6, non-commercial net long positions rose to nearly 163K contracts, a two-week high and levels last seen in the summer of 2023. At the same time, institutional players increased short exposure to just under 216K contracts.
Total open interest climbed to a three-week high near 882K contracts, pointing to rising participation and slightly firmer conviction on the bullish side.
What markets are focused on next
Near term: Attention turns to Thursday’s weekly US labour market report, alongside ongoing comments from Fed officials. Markets are also watching the Supreme Court of the United States, which could rule on the legality of Trump’s tariff policies at any time.
Risk: A renewed rise in US yields or a more hawkish repricing of the Fed outlook could quickly draw fresh sellers into the pair. A clean break below the key 200-day Simple Moving Average (SMA) would open the door to a deeper medium-term correction.
Tech corner
For now, the 1.1700 level remains a tough hurdle for bulls. Without a convincing push higher, the lack of upside momentum risks leaving the pair vulnerable to a pullback towards the key 200-day SMA around 1.1580.
The loss of the 2025 bottom at 1.1618 (January 9) could open the door for a potential retracement toward the 200-day SMA at 1.1575 prior to the November trough at 1.1468 (November 5) and the August floor at 1.1391 (August 1).
In the opposite direction, the initial up barrier comes at the December 2025 top at 1.1807 (December 24). If bulls push harder, a probable visit to the 2025 ceiling at 1.1918 (September 17) could start emerging on the horizon ahead of the 1.2000 yardstick.
Momentum indicators point to further losses near term: The Relative Strength Index (RSI) eases to nearly 41, adding to the idea of extra weakness, while the Average Directional Index (ADX) around 19 still points to a fairly solid trend.
Bottom line
For now, EUR/USD is being driven far more by what’s happening in the US than by developments in the euro area.
Until the Fed offers clearer guidance on how far it’s willing to ease, or the eurozone delivers a more convincing cyclical upswing, any recovery in the pair is likely to be steady rather than spectacular.
In short, the Euro (EUR) benefits when the Greenback softens, but it’s still waiting for a stronger story of its own.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
- EUR/USD trades in an inconclusive fashion around 1.1650 on Wednesday.
- The US Dollar seems to have lost some momentum amid rising Fed rate cut bets.
- US Retail Sales expanded more than estimated in November.
EUR/USD seems to have entered some consolidative phase in the last few days, always looking at the US Dollar (USD) for direction and with the upside limited by the 1.1700 region so far.
EUR/USD navigates a tight range midweek, lacking clear direction and mostly orbiting around the 1.1650 zone amid the slightly offered stance in the Greenback.
The move lower in spot also comes amid further decline in US Treasury yields across various maturity periods, while the German 10-year bund yields manage to clinch their second day in a row of gains, albeit modest ones.
The pair’s daily decline owes a lot more to the USD side of the equation than anything Euro-specific. Fresh selling pressure in the Greenback resurface as market participants reshift their attention to the Fed’s independence issue in combination with the likelihood that the Federal Reserve (Fed) could further lower its interest rates in the upcoming months. The latter has been underpinned by the latest US CPI data for December.
That said, the US Dollar Index (DXY) comes under some tepid downward pressure, prompting it to give away part of the recent advance and confront the contention zone around 99.00.
The Fed cuts, but isn’t easing off the brakes
The Fed delivered the December rate cut markets had been expecting, but the real signal came from the tone rather than the action. A split vote and carefully chosen words from Chair Jerome Powell made it clear the Fed isn’t in any rush to keep easing.
Powell reiterated that inflation remains “somewhat elevated” and stressed that policymakers want more convincing evidence that the labour market is cooling without tipping into something uglier. Updated projections barely budged, still showing just one additional 25-basis-point cut pencilled in for 2026, alongside steady growth and only a modest rise in unemployment.
The press conference followed a familiar script: The Fed is happy to wait and watch the data. In addition, Powell ruled out rate hikes as a baseline scenario, but he also avoided giving any hint that another cut is imminent. He pointed to import tariffs introduced under former President Donald Trump as one factor keeping inflation sticky, underlining that some of the pressure is policy-driven.
Minutes released later underlined just how finely balanced the decision was. Divisions inside the Federal Open Market Committee (FOMC) were deep, with some officials favouring pre-emptive easing as the labour market cools and others worried that inflation progress could stall. The takeaway is straightforward: confidence around further cuts is fading, and a pause now looks like the path of least resistance unless inflation improves or unemployment rises more sharply.
The ECB stays calm and comfortable
Across the Atlantic, the European Central Bank (ECB) also stayed on hold at its December 18 meeting, and sounded increasingly at ease with that decision. Small upgrades to parts of the growth and inflation outlook have effectively shut the door on near-term rate cuts.
Recent data have helped steady nerves. Euro area growth has surprised slightly to the upside, exporters have coped better than feared with US tariffs, and domestic demand has softened the blow from ongoing weakness in manufacturing.
Inflation dynamics continue to support the ECB’s stance. Price pressures are hovering close to the 2% target, with services inflation doing most of the heavy lifting, a pattern policymakers expect to persist.
Updated projections still show inflation dipping below target in 2026–27 due to lower energy prices before drifting back toward 2% later on. At the same time, officials flagged the risk that services inflation could remain sticky, as wage growth slows only gradually.
Growth forecasts were nudged higher as well, reinforcing the view that the economy is proving more resilient than feared. As President Christine Lagarde put it, exports remain “sustainable” for now. She again stressed that policy decisions will be taken meeting by meeting and guided by incoming data.
Markets have taken the message on board. Pricing points to barely 5 basis points of easing this year, consistent with an ECB that sees little urgency to move.
Politics clouds the Dollar outlook
The latest pullback in the US Dollar followed reports that the Justice Department could seek to indict Powell over comments he made to Congress regarding cost overruns on a renovation project at the Fed.
Powell described the move as a pretext to gain leverage over interest-rate decisions, something Trump has openly pushed for, and the episode has revived concerns about the Fed’s independence, weighing on confidence in the Greenback.
Adding another layer of uncertainty, President Trump said this week that candidates to succeed Powell could be announced in the coming weeks.
Positioning tilts back toward the Euro
Speculative positioning continues to lean in favour of the euro (EUR), with momentum starting to rebuild.
According to Commodity Futures Trading Commission (CFTC) data for the week ending January 6, non-commercial net long positions rose to nearly 163K contracts, a two-week high and levels last seen in the summer of 2023. At the same time, institutional players increased short exposure to just under 216K contracts.
Total open interest climbed to a three-week high near 882K contracts, pointing to rising participation and slightly firmer conviction on the bullish side.
What markets are focused on next
Near term: Attention turns to Thursday’s weekly US labour market report, alongside ongoing comments from Fed officials. Markets are also watching the Supreme Court of the United States, which could rule on the legality of Trump’s tariff policies at any time.
Risk: A renewed rise in US yields or a more hawkish repricing of the Fed outlook could quickly draw fresh sellers into the pair. A clean break below the key 200-day Simple Moving Average (SMA) would open the door to a deeper medium-term correction.
Tech corner
For now, the 1.1700 level remains a tough hurdle for bulls. Without a convincing push higher, the lack of upside momentum risks leaving the pair vulnerable to a pullback towards the key 200-day SMA around 1.1580.
The loss of the 2025 bottom at 1.1618 (January 9) could open the door for a potential retracement toward the 200-day SMA at 1.1575 prior to the November trough at 1.1468 (November 5) and the August floor at 1.1391 (August 1).
In the opposite direction, the initial up barrier comes at the December 2025 top at 1.1807 (December 24). If bulls push harder, a probable visit to the 2025 ceiling at 1.1918 (September 17) could start emerging on the horizon ahead of the 1.2000 yardstick.
Momentum indicators point to further losses near term: The Relative Strength Index (RSI) eases to nearly 41, adding to the idea of extra weakness, while the Average Directional Index (ADX) around 19 still points to a fairly solid trend.
Bottom line
For now, EUR/USD is being driven far more by what’s happening in the US than by developments in the euro area.
Until the Fed offers clearer guidance on how far it’s willing to ease, or the eurozone delivers a more convincing cyclical upswing, any recovery in the pair is likely to be steady rather than spectacular.
In short, the Euro (EUR) benefits when the Greenback softens, but it’s still waiting for a stronger story of its own.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
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