EUR/USD Price Forecast: How convincing is the rebound?
- EUR/USD adds to Wednesday’s bounce, reclaiming the 1.1500 barrier and above.
- The US Dollar traded with marked losses amid a strong pullback in US Treasury yields.
- The US government shutdown is officially the longest in history.
EUR/USD extends its rebound beyond 1.1500 the figure on Thursday, building on the previous day’s recovery and putting further distance from recent lows around 1.1470.
The extra advance comes as the US Dollar (USD) faces renewed and quite intense selling pressure, prompting the US Dollar Index (DXY) to leave behind the area of recent multi-month tops and slip back below the key 100.00 support. The move lower in the Greenback is also accompanied by an equally pronounced retracement in US Treasury yields across the spectrum.
Washington gridlock starts to sting
The government shutdown has now hit day 37, the longest in US history, and there’s still no sign of progress.
In Washington, the blame game is in full swing. Both parties keep pointing fingers, but neither seems to be making real moves toward reopening the government.
Meanwhile, the fallout is spreading. More than a million federal employees are still showing up to work without pay, and another 600,000 have been sent home. Technically, a 2019 law guarantees they’ll get back pay once this is over, but some recent remarks from President Trump have sparked doubt about whether that promise will hold.
Flights across the US and energy aid for low-income households could soon be the next casualties of the shutdown.
In the meantime, the Senate is back in session today, trying once again to find a path forward. President Trump, for his part, is urging Senate Republicans to end the standoff over a short-term spending bill by scrapping the filibuster, a move GOP leaders are still pushing back against.
Trade tensions cool, but just barely
After weeks of friction, Presidents Donald Trump and Xi Jinping finally sat down in South Korea last week, giving markets a brief moment to exhale. The result: another pause in the US–China trade war.
After nearly two hours of talks, Trump said the US would roll back some tariffs, while China agreed to restart soybean imports, keep rare earth exports steady, and cooperate more on fentanyl trafficking. Beijing later confirmed both sides had agreed to extend their trade truce for another year, a modest but welcome bit of stability after earlier, rocky talks in Malaysia.
The Fed keeps its cautious tone
The Federal Reserve (Fed) took a measured approach at its October 29 meeting, cutting rates by 25 basis points and restarting modest Treasury purchases to ease funding pressures in money markets.
The decision, passed by a 10–2 vote, brought the target range down to 3.75%–4.00%, exactly what markets were expecting. Rate-setters framed the move as a safeguard against a cooling labour market, not the beginning of a new easing cycle.
During his press conference, Fed Chair Jerome Powell acknowledged growing differences within the Federal Open Market Committee (FOMC) and cautioned investors not to count on another rate cut in December.
Markets are now pricing in just over 17 basis points of additional easing by year-end and nearly 84 basis points by the end of 2026.
ECB happy to stay on hold
Over in Europe, the European Central Bank (ECB) kept rates unchanged at 2.00% for a third straight meeting last week and offered little new guidance. For now, officials seem comfortable with growth and inflation hovering near the target, a rare position of stability among major central banks.
After trimming rates by two percentage points earlier in the year, the ECB has clearly shifted into wait-and-see mode.
President Christine Lagarde noted that global risks have eased somewhat after recent trade developments and Washington’s partial tariff rollback but warned that uncertainty remains high.
With implied rates pointing to around 10 basis points of easing by the end of 2026, markets seem to believe the ECB’s rate-cut cycle is pretty much done, at least for now.
Tech view
So far, EUR/USD seems to have met some decent contention near 1.1470 (November 5), the lowest level since August.
In case bears regain control, the November floor at 1.1468 (November 5) should offer initial support, ahead of the August valley at 1.1391 (August 1), and the key 200-day SMA at 1.1338. South from here sits the weekly low at 1.1210 (May 29), before the May bottom at 1.1064 (May 12).
In the opposite direction, the 100-day and 55-day SMAs at 1.1664 and 1.1668, respectively, offer provisional hurdles prior to the weekly top at 1.1728 (October 17) and the October peak at 1.1778 (October 1). Up from here emerges the 2025 ceiling of 1.1918 (September 17), seconded by the 1.2000 threshold.
In the meantime, momentum indicators remain negative: the Relative Strength Index (RSI) bounces to nearly 41, while the Average Directional Index (ADX) close to 20 suggests a trend that keeps gathering steam.
-1762455349823-1762455349823.png&w=1536&q=95)
What’s next
EUR/USD appears in a consolidative phase for the time being, waiting for a catalyst strong enough to shake it out of its range: a sudden change of stance by the Fed, shifts in global risk appetite, or fresh demand for Eurozone assets in detriment fo their US peers could all help, but until then, it’s the Greenback’s price action that should continue to steer the narrative.
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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
