EUR/USD Price Forecast: Further losses likely below 1.1600
- EUR/USD meets support once again around the 1.1650 region on Tuesday.
- The US Dollar keeps the positive foot amid risk-off mood, lower US yields.
- French political woes continue to weigh on the single currency.
EUR/USD stayed on the back foot on Tuesday, adding to Monday’s pessimism and testing support in the mid-1.1600s.
The ongoing slide comes as political uncertainty in France refuses to fade and the US federal government shutdown drags on, with no sign of compromise from either side.
At the same time, the Greenback keeps powering ahead. The US Dollar Index (DXY) found fresh momentum in the risk-off mood, climbing to two-week highs around the 98.50–98.60 band.
Paris politics taking centre stage
France’s political saga is back in the headlines. President Emmanuel Macron turned to outgoing prime minister Sebastien Lecornu, asking him to open talks with rival parties and find a way out of the stalemate.
The twist? Lecornu had just resigned only hours after unveiling what became the shortest-lived cabinet in modern French history. Even so, Macron wants him to stay on temporarily and steer discussions until Wednesday night in hopes of restoring some calm. Tic-toc, tic-toc.
Central banks keeping their guard up
Across the Atlantic, the Federal Reserve (Fed) cut rates by 25 basis points on September 17, a nod to a softer labour market, though it also warned inflation remains “somewhat elevated.”
The Fed’s latest dot plot tilted dovish, signalling another 50 basis points of easing before year-end, followed by smaller cuts running into 2026–27. Growth forecasts inched up to 1.6%, unemployment held steady at 4.5%, and inflation expectations were unchanged.
Not all officials were on board: incoming governor Stephen Miran pushed for a larger half-point cut but couldn’t sway the committee.
At his press conference, Chair Jerome Powell acknowledged slower job creation and softer household spending, alongside inflation readings of 2.7% for headline PCE and 2.9% for core. He said tariffs are keeping some prices sticky even as services inflation cools, adding that the balance of risks now looks “more balanced”, a hint the Fed is nearing neutral rather than starting a deep easing cycle.
When he spoke again on September 23, Powell doubled down on that message: inflation could still flare up even as a weaker labour market drags on growth.
Meanwhile in Europe, the European Central Bank (ECB) kept rates unchanged in September and stuck to its meeting-by-meeting approach. Policymakers said inflation remains on track to converge toward the 2% medium-term goal. Core inflation is projected to average 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” and that risks are broadly balanced, stressing again that future moves will depend entirely on the data.
Trade tensions bubbling in the background
Trade remains the wild card in the global mix. Washington and Beijing agreed to a 90-day truce that has helped calm nerves, but tariffs are still firmly in place: the US maintains 30% duties on Chinese goods, while Beijing keeps 10% on US exports.
There’s also been movement between Washington and Brussels. The US and EU reached a partial trade deal that lowers EU tariffs on American industrial goods and expands access for agricultural and seafood exports. In return, Washington imposed a 15% tariff on most EU imports.
The big unresolved issue? Autos, still hanging under the threat of new tariffs.
Investors turning wary on the Euro
Positioning data shows traders have become more cautious. Commodity Futures Trading Commission (CFTC) figures for the week ending September 23 remain in place in light of the current federal government shutdown and the inability to update data releases. The latest report revealed net longs on the EUR falling to 114.3K contracts, the lowest since July. Institutional net shorts, in the meantime, narrowed slightly to 165.8K, while open interest rose to a two-week high of 859.2K contracts.
Technical landscape
EUR/USD remains mired in a sideline pattern, with the immediate hurdle just above 1.1900 the figure and some decent contention near the 1.1600 neighbourhood. Furthermore, the constructive outlook for the pair should remain intact as long as it trades above its key 200-day SMA at 1.1202.
In case bulls regain control, the next up-barrier is expected at the 2025 ceiling of 1.1918 (September 17), just ahead of the psychological 1.2000 threshold.
In contrast, a breach below the weekly trough at 1.1645 (September 25) could pave the way to a potential challenge of the intermediate 100-day Simple Moving Average (SMA) at 1.1625, seconded by the weekly base at 1.1574 (August 27) and the August valley at 1.1391 (August 1).
Momentum indicators point to further losses in the very near term: the Relative Strength Index (RSI) slips back to the 45 zone, indicative that extra decline could be lying ahead. In addition, the Average Directional Index (ADX) near 12 suggests a trend that lacks muscle for now.
EUR/USD daily chart
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Looking for a spark
EUR/USD might have some room to rebound, but a clear trigger is missing. A dovish surprise from the Fed, weaker demand for US assets, a steady-handed ECB, or progress on trade could all be enough to turn sentiment around and give the pair a lift.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
