EUR/USD on thin ice: Dollar comeback threatens Euro’s fragile hold
- The Dollar regains traction while the euro clings to fragile support near 1.1565.
- The US data freeze has muted volatility — but DXY’s quiet rebound is tightening pressure on EUR/USD.
- Price compression between 1.1565 and 1.1622 hints at an imminent breakout; downside bias dominates unless 1.1625 is reclaimed.
Dollar paralysis turns into a comeback
The ongoing U.S. government shutdown may have frozen official data, but it hasn’t frozen the dollar’s recovery.
As traders wait for delayed CPI and jobs figures, the greenback is quietly regaining traction, consolidating above its 98.80 base and forming a higher-low structure on the Dollar Index (DXY).
This quiet buildup of momentum reflects early positioning for when U.S. data finally resumes — and it’s keeping the euro pinned in check.
Euro struggles to stay afloat
EUR/USD trades near 1.1595, weighed down by the stronger dollar tone and the absence of macro catalysts from either side of the Atlantic.
With the ECB adopting a cautious stance and Eurozone growth remaining soft, the pair’s recent recovery attempts have repeatedly stalled below 1.1650.
The lack of fundamental conviction has left the pair in a narrow technical range — one that’s slowly leaning bearish as the DXY strengthens.
DXY: The silent surge beneath the surface
The Dollar Index continues to build strength above 99.00, reclaiming lost ground after defending its key liquidity pocket at 98.60–98.80.
A breakout toward 99.80–100.00 could easily translate to renewed downside pressure on EUR/USD, especially as market liquidity thins heading into late October.
While headlines focus on the shutdown, the price chart shows the opposite: a calm accumulation phase setting up for the next move higher.
As long as DXY maintains this structure, the euro’s upside attempts are likely to remain capped.
How the Dollar revival impacts EUR/USD
- Inverse correlation at play: Each higher low in DXY corresponds with lower highs on EUR/USD — confirming that dollar strength remains the dominant flow.
- Pre-data positioning: Traders appear to be rotating back into the dollar ahead of potential post-shutdown volatility.
- Technical mirror: The euro’s repeated rejection at 1.1622 mirrors DXY’s rebound base, reinforcing the continuation bias toward USD strength.
EUR/USD technical outlook (four-hour)
EUR/USD is consolidating inside a tight intraday band between 1.1565 and 1.1622, resting above a bullish Fair Value Gap (FVG) at 1.1577–1.1565.
This FVG now acts as the immediate support layer, while 1.1622 caps price as short-term resistance.
The pair remains in compression — a typical pre-breakout phase — and the next decisive move below or above these levels will define the coming direction.
Bullish scenario – Rejection from FVG support
If price defends the 1.1570–1.1565 support base and reclaims 1.1600, buyers may attempt a reaction toward 1.1622.
A clean break and 4H close above 1.1622 confirms short-term bullish strength, opening a move into 1.1650–1.1680, where prior liquidity resides.
Bullish confirmation triggers
- Wick rejections from 1.1570–1.1565.
- Break and close above 1.1622.
- FVG support holds firm.
Upside targets
1.1622 – 1.1650 – 1.1680.
Invalidation
Break below 1.1560 negates bullish setup.
Bearish scenario – Breakdown through FVG support
If price closes below 1.1560, sellers regain control.
This confirms a clean sweep of the FVG base, exposing liquidity toward 1.1500 and potentially 1.1450 as momentum accelerates.
Retests toward 1.1580–1.1600 would then act as opportunities for continuation shorts.
Bearish confirmation triggers
- Breakdown candle below 1.1560.
- Retest rejection from 1.1580–1.1600.
- DXY sustains above 99.20.
Downside targets
1.1550 – 1.1500 – 1.1450.
Invalidation
Sustained 4H close above 1.1625 nullifies bearish structure.
Technical summary
Bias | Key Support | Key Resistance | Short-Term View | Next Direction Trigger |
|---|---|---|---|---|
Neutral–Bearish | 1.1570–1.1565 | 1.1622–1.1650 | Price compression | Break below 1.1560 or above 1.1625 |
Price action remains trapped between inefficiency fill and liquidity resistance, suggesting a breakout phase is near.
Until confirmed otherwise, downside continuation remains favored given DXY’s strengthening structure.
Final thoughts
EUR/USD is skating on thin ice, caught between technical compression and dollar resilience.
While the data blackout has muted volatility, it’s also allowed the dollar to rebuild its base quietly.
Once economic releases return to the calendar, expect a sharp directional release — and as it stands, the path of least resistance still leans lower.
Author
Jasper Osita
Independent Analyst
Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis, trading Smart Money Concepts (SMC) with fundamentals in mind.
