EUR/USD Forecast: Euro recovery consolidates but remains fragile

EUR/USD trades around 1.1540 on Monday, up 0.20% on the day, extending Friday’s rebound from 1.1490. The move reflects a moderate recovery in risk sentiment, while the US Dollar loses momentum as easing expectations continue to build.

Markets remain focused on the increasingly accommodative tone coming from the Federal Reserve (Fed). After New York Fed President John Williams suggested last Friday that policy was now “modestly restrictive” and that there was “room for further adjustment in the near term”, investors were encouraged again on Monday by remarks from Governor Christopher Waller, who said he would advocate for a rate cut at the December meeting, noting that recent data show “not much change” in the inflation-employment balance and highlighting persistent weakness in the labor market.

This shift has significantly strengthened easing expectations. According to the CME FedWatch tool, markets now assign nearly a 70% chance to a 25-basis-point rate cut in December, up from roughly 50% at the end of last week.

In the Eurozone, however, the backdrop remains more fragile. Monday’s IFO survey showed that German business sentiment deteriorated further in November, with the headline index falling to 88.1 from 88.4, against expectations for an improvement. The small uptick in the Current Assessment index was overshadowed by a sharp decline in Expectations, down to 90.6, confirming that Germany’s recovery remains slow and uneven. An element that limits upside potential for the Euro (EUR).

This follows Friday’s Purchasing Managers Index (PMI) releases, which revealed renewed contraction in Eurozone Manufacturing activity and a slowdown in Services. The region’s subdued momentum continues to prevent the Euro from attracting more sustained inflows, even though the broader market mood is improving.

In the United States (US), last week’s S&P Global PMIs and the Michigan Consumer Sentiment Index painted a mixed but broadly softening picture of the economy. The data reinforced the narrative of a gradual cooling, giving markets confidence that the Fed can safely shift toward policy easing. The dovish messaging from Fed policymakers largely overshadowed these developments.

While Monday’s economic calendar remains light, traders are already preparing for a high-impact Tuesday, featuring several economic data sets in the Eurozone and especially in the US.

These releases could redefine short-term direction for both the US Dollar and the Euro, and will likely play a decisive role in shaping EUR/USD this week. If US data confirm further cooling, the pair may extend its recovery. Conversely, stronger-than-expected US inflation or consumption figures could quickly restore support for the Greenback and cap the Euro’s current rebound.

EUR/USD Technical Analysis

In the 4-hour chart, EUR/USD trades at 1.1541, up for the day and 25 pips above the day opening. The 100-period Simple Moving Average (SMA) edges lower at 1.1554, and the pair holds beneath it, keeping rallies contained. A close above this average would ease bearish pressure. The Relative Strength Index (RSI) prints 50 (neutral) after a rebound from oversold, hinting at stabilizing momentum. Immediate resistance stands at 1.1550.

The descending trend line from 1.1819 limits gains, with resistance seen at 1.1624. Support is seen at 1.1500, followed by 1.1470. A break of 1.1550 would open a run toward 1.1624 and 1.1820, while rejection under the moving average would leave the bias heavy and expose 1.1500.

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