EUR/USD Price Forecast: Next on the downside comes 1.1550
- EUR/USD loses ground for the third straight day, challenging 1.1600.
- The US Dollar gathers steam and advances to multi-day highs.
- Preliminary PMIs and US CPI data on Friday remain centre stage.
EUR/USD extends its slide on Tuesday, testing support near the 1.1600 level as the Euro came under renewed selling pressure alongside other risk-sensitive assets.
The pair’s weakness comes amid a dip in US Treasury and German 10-year bund yields, while the US Dollar (USD) is still managing to hold firm. That said, the US Dollar Index (DXY) notched its third straight day of gains, edging closer to the 99.00 hurdle.
Overall, calmer nerves around US–China trade tensions are helping the Greenback stay bid, while investors await a fresh batch of preliminary PMI data and key US inflation figures for direction.
Trade tensions simmer but stay in focus
Markets are once again keeping a close eye on US–China relations. There’s speculation that President Trump and President Xi Jinping could meet later this month in South Korea, though the relationship remains fragile.
Beijing’s recent decision to restrict rare earth exports has stirred things up again, prompting a sharp reaction from Washington, including threats from Trump of triple-digit tariffs on Chinese imports, reviving fears of another trade flare-up.
That said, there are faint signs of thawing. Both Treasury Secretary Scott Bessent and China’s Commerce Ministry have said communication lines remain open, hinting at a willingness to keep talking and possibly extend the current tariff truce.
Fed keeps its options open
In the US, the Federal Reserve (Fed) looks set to deliver another 25-basis-point rate cut at its October 29 gathering.
Back to the latest event, the updated “dots plot” leaned dovish, signalling around 50 basis points of further easing by year-end, followed by smaller adjustments through 2026–27. In addition, growth projections were lifted slightly to 1.6%, while unemployment stayed at 4.5% and inflation forecasts were unchanged.
Still around the Fed, the latest Minutes showed that policymakers are willing to act again if needed, but there’s no rush.
Fed Chair Jerome Powell recently acknowledged that the labour market has cooled, adding that the Fed will continue to take decisions “meeting by meeting” as it balances softer jobs data against stubborn inflation.
ECB in wait-and-see mode
Across the Atlantic, the European Central Bank (ECB) also stayed put at its September meeting, maintaining a patient, data-dependent stance. Officials reiterated that inflation should gradually move toward target, projecting core inflation at 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde struck a calm tone, saying policy is “in a good place” and that risks appear balanced for now. She emphasised that any future tweaks will depend entirely on incoming data.
The meeting Accounts echoed that view: measured but cautiously optimistic. Policymakers sounded slightly more upbeat on eurozone growth and saw little reason for additional easing, despite uncertainty around US trade policy.
Market pricing now points to just over 19 basis points of easing by the end of 2026, reinforcing the view that the ECB is largely done cutting.
From the technical standpoint
EUR/USD keeps the negative performance well in place so far this week.
The continuation of the current downward trend could open the door to a potential visit to the October base at 1.1542 (October 9, 14), ahead of the August floor at 1.1391 (August 1), and before the critical 200-day SMA at 1.1267. A deeper decline would expose a retracement to the weekly trough at 1.1210 (May 29).
Bulls, on the other hand, look for an immediate target at the weekly high at 1.1728 (October 17), just ahead of another minor barrier at the monthly peak at 1.1778 (October 1). The breakout above the latter could put the 2025 ceiling of 1.1918 (September 17) back on the radar before the psychological 1.2000 threshold.
So far, the pair’s positive outlook should remain unchanged while above the 200-day SMA.
Momentum indicators show some weakness: the Relative Strength Index (RSI) deflates to around 44, suggesting that extra losses are still on the table. In addition, the Average Directional Index (ADX) below 16 points to a trend that lacks muscle.
EUR/USD daily chart
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Looking for direction
For now, EUR/USD remains caught in search of a clear catalyst. A more dovish pivot from the Fed, shrinking demand for US assets, a steadier hand from the ECB, or a genuine breakthrough on the trade front could finally give the European currency some reason to believe.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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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.
