EUR/USD Price Forecast: Beware of the 200-day SMA

EUR/USD’s latest rally looks to be taking a breather just north of 1.1900. That area is acting as a bit of a ceiling for now, with sellers stepping in and slowing the momentum after a decent run higher. Still, the broader bullish narrative has not really changed. The structure remains constructive, and as long as the pair holds comfortably above the 200 day SMA around 1.1640, the upside bias stays intact.

Further weakness drags EUR/USD to the area of new monthly lows near 1.1740 on Thursday, building on Wednesday’s losses at the same time.

The pair’s renewed and intense bearish leg comes on the back of the solid recovery in the Greenback, lifting the US Dollar Index (DXY) to fresh four-week highs while briefly surpassing the key 98.00 barrier.

The move higher in the buck also appears underpinned by firmer-than-expected results from the weekly US labour market data, at the time when investors keep digesting Wednesday’s release of the FOMC Minutes, which showed a still pretty divided Committee when it comes to the potential rate path.

Fed: steady hands, slightly calmer voice

The Federal Reserve (Fed) left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its late January meeting. No surprises there. Markets were fully prepared for a hold.

What did change, subtly but importantly, was the tone.

Policymakers sounded a touch more comfortable with where the economy stands. Growth is holding up better than feared, and, crucially, the Federal Open Market Committee (FOMC) no longer sees employment risks as deteriorating. Inflation is still described as somewhat elevated, but the sense of urgency has clearly faded. The vote passed 10 to 2, with two dissenters favouring a 25 basis point cut, a reminder that not everyone sees the path ahead in the same way.

At the press conference, Chair Jerome Powell kept things measured. Policy, he said, is in a good place, while decisions remain meeting by meeting, with no preset course. He downplayed recent inflation surprises, arguing that tariffs explain much of the overshoot, while reiterating that services disinflation continues to progress. Importantly, no one on the Committee is treating a rate hike as the base case.

The message was straightforward: confidence has edged higher, but there is still no rush to move.

The January Minutes reinforced that impression. Most participants supported holding steady. Several said further easing would likely be appropriate if inflation declines in line with expectations, yet others warned that hikes could still be warranted if price pressures prove sticky. Inflation is seen drifting back toward 2%, but the journey may be uneven. With growth solid and the labour market stabilising, the Fed is firmly data dependent, not leaning decisively toward aggressive cuts.

ECB: calm, consistent, and in no hurry

The European Central Bank (ECB) also left its three key rates unchanged in a unanimous and widely expected decision.

The communication felt steady, almost rehearsed. The medium-term outlook still points to inflation returning to the 2% target, and recent data have not materially altered that view. Wage indicators appear to be stabilising, although services inflation remains under scrutiny. The ECB still sees a modest dip in consumer prices in 2026, reinforcing the argument for patience.

At her press conference, President Christine Lagarde described risks as broadly balanced. Policy remains agile and data dependent. The Governing Council acknowledged recent foreign exchange moves but judged them to be within historical norms, stressing again that there is no exchange rate target.

In short, the ECB is not on autopilot, but it is not in a hurry either.

Markets are pricing just over 8 basis points of easing this year and broadly expect another hold at the March 19 meeting.

Euro positioning: more crowded, more contested

Positioning in the Euro (EUR) is starting to feel a bit more intense.

The latest Commodity Futures Trading Commission (CFTC) data show speculative net longs climbed to nearly 180.3K contracts in the week to February 10, the highest level since September 2020. At first glance, that looks like a solid vote of confidence in the single currency.

But it is not that straightforward.

Hedge funds and other institutional players have also been building up their short exposure, pushing it to around 235.8K contracts, the highest since May 2023. When both longs and shorts increase at the same time, it usually means the market is not simply drifting higher. It means both sides are leaning in with conviction.

Open interest has surged to roughly 926.3K contracts, a fresh record. That tells you this is not a thin, fragile rally. It is a proper tug of war. Bulls see upside. Bears see vulnerability. And both are prepared to defend their view.

In that kind of environment, moves can extend, but they can also turn quickly if the narrative shifts.

What it means for EUR/USD

Net positioning still favours the Euro, but the buildup in opposing shorts suggests the path higher is becoming more complicated. The trade is more crowded, more sensitive, and more reactive to incoming macro catalysts.

What to watch

Near term: the US Dollar remains the dominant force. Jobs data, inflation releases and geopolitical headlines will likely dictate the tempo. Meanwhile, advanced PMIs and the US Personal Consumption Expenditures (PCE) will be key checkpoints.

Risks: A Fed that stays cautious for longer continues to underpin the Greenback, particularly against an ECB that is effectively in wait-and-see mode. From a technical perspective, a decisive break below the 200 day Simple Moving Average (SMA) would increase the probability of a deeper corrective phase.

Technical corner

In the daily chart, EUR/USD trades at 1.1771. The 55-day Simple Moving Average (SMA) climbs above the 100- and 200-day SMAs, reinforcing a bullish alignment. All three averages edge higher, and the price holds above them to preserve an upside bias. The Relative Strength Index (14) slips to 45, keeping momentum subdued below the midline. Support is seen at 1.1766, while immediate resistance aligns at 1.2082.

Trend strength softens as the Average Directional Index (14) eases toward 25, suggesting consolidation risk unless buyers extend the move. Further resistance emerges at 1.2266, then at 1.2350. A pullback below the 55-day SMA at 1.1762 could expose 1.1578, whereas a firm topside break would keep the broader bullish structure intact.

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

Bottom line

EUR/USD right now is being driven far more by the US narrative than by developments in the euro area.

With the Fed’s 2026 rate path still lacking clarity and the euro area yet to deliver a convincing cyclical rebound, upside progress is likely to remain gradual rather than turning into a clean, sustained breakout.