EUR/USD Price Forecast: Further weakness likely below the 200-day SMA

Since the rejection from annual highs at the 1.2100 level in late January, the short-term outlook for EUR/USD has been becoming worse and worse. The recent break below the important 200-day SMA also opens up the possibility of further retracements in the near-term horizon.

Following Tuesday’s drop to fresh yearly troughs around 1.1530, EUR/USD manages to regain some buying interest and advances past 1.1600 the figure on Wednesday, all against a modest improvement in the sentiment surrounding the risk-associated assets.

That said, spot trades with modest gains on the back of the loss of traction in the US Dollar (USD) despite the geopolitical landscape continue to show no signs of improvement. Indeed, the US Dollar Index (DXY) breaches below the 99.00 support, although it meets contention around 98.70 in spite of the persistent recovery in US Treasury yields across the curve.

Fed: policy steady, debate alive

The Federal Reserve (Fed) left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% in January, fully in line with expectations.

What shifted was the tone. The Federal Open Market Committee (FOMC) sounded more comfortable with the current backdrop. Growth continues to hold up, employment risks are no longer seen as deteriorating, and although inflation remains somewhat elevated, the sense of urgency has clearly eased.

The 10 to 2 split, with two members favouring a 25 basis point cut, shows the internal debate remains alive.

Chair Jerome Powell described policy as being in a “good place”, with decisions taken meeting by meeting. When it comes to tariffs, he said they remain a factor behind recent inflation noise, while services disinflation was highlighted as ongoing. A hike is not the base case, but neither is an imminent pivot.

The Minutes reinforced that balanced message. Rate cuts remain possible if inflation continues to cool, but hikes have not been ruled out should price pressures prove persistent. The Fed remains firmly data dependent.

ECB: calm stance, cautious outlook

The European Central Bank (ECB) also left rates unchanged in a unanimous decision.

President Christine Lagarde struck a calm but cautious tone in her latest remarks: inflation is still expected to return to the 2% target over the medium term, although services prices remain under scrutiny and further easing is projected into 2026. She pointed to resilient wages, a firm labour market and steady investment, while reiterating that the ECB monitors the Euro (EUR) but does not target it.

Markets currently price just over 5 basis points of tightening this year, with a hold at the March meeting almost fully discounted. The ECB appears broadly comfortable with the current stance while remaining firmly data-driven.

Positioning: trimming, not reversing

Commodity Futures Trading Commission (CFTC) data show speculative net longs in EUR eased to around 157K contracts in the week to February 24, a four-week low. Institutional players have also trimmed exposure.

The broader structure remains long EUR, but conviction is softening at the margin. Open interest declined for a second consecutive week to roughly 911.3K contracts, signalling position trimming rather than aggressive fresh shorts.

In practical terms, the long bias remains intact, though less forceful. This looks more like de-risking than capitulation. With positioning still elevated, the single currency remains sensitive to renewed US Dollar strength if US data continue to outperform.

What moves EUR/USD from here

Near term: the US narrative remains the dominant driver. Indeed, trade tensions and geopolitical jitters continue to reinforce the Greenback’s role as the primary force shaping price action. Data-wise, Thursday’s weekly US labour market figures will set the stage ahead of Friday’s always closely watched Nonfarm Payrolls (NFP).

Risks: unabated geopolitical tensions should keep the buck propped up for now, keeping the pair under constant pressure. A sustained breach below the 200-day Simple Moving Average (SMA) would increase the probability of a deeper corrective move.

Technical scenario

In the daily chart, EUR/USD trades at 1.1625. The near-term bias is mildly bearish as spot slips below the rising 55- and 100-day Simple Moving Averages (SMAs), which now cap the price area around 1.1769–1.1698 while the 200-day SMA trends higher near 1.1671, highlighting a deeper but still intact broader uptrend. The Relative Strength Index (RSI) holds near 34, signalling persistent downside momentum after the recent break lower, while the Average Directional Index (ADX) edges higher above 20 and hints that the emerging bearish phase is gaining traction within that longer-term bullish context.

Immediate resistance aligns at 1.1766, where prior horizontal supply converges with the clustered short- and medium-term SMAs, and a daily close above this area would ease selling pressure and open the path toward 1.2082. On the downside, initial support emerges at 1.1530, with a break there exposing the lower band of the support cluster at 1.1491 and 1.1469, ahead of a more distant floor at 1.1392 that guards against a larger corrective extension.

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

Bottom line: Dollar dynamics rule the mood

Developments around EUR/USD remain dictated far more by Washington than by Frankfurt.

Until the Fed’s policy path becomes clearer, or the euro area delivers a stronger cyclical upswing, rallies are likely to remain contained. For now, the Dollar remains firmly in the driving seat.