EUR/USD Price Forecast: Next on the downside comes 1.1815
- EUR/USD extends the correction to the 1.1850 region on Thursday.
- The US Dollar appears modestly bid ahead of key US data releases.
- Investors are now expected to shift their attention to the upcoming US CPI.
EUR/USD’s recent rebound appears to have stalled just above the 1.1900 mark, where some light resistance has capped the upside for now. Even so, the broader setup still leans constructive, and unless sentiment shifts materially, the 1.2000 handle remains the next natural upside target.
That said, EUR/USD is trading slightly on the back foot on Thursday, extending its pullback for a third consecutive session and finding some tentative support around the 1.1850 area.
The move lower comes as the US Dollar (USD) picks up humble traction, helped along by fresh headlines surrounding US-Iran tensions and speculation that Russia could potentially return to the US Dollar system. In that context, the US Dollar Index (DXY) briefly pushed above the 97.00 level before giving back part of the move, reflecting a market that is firm but not fully convinced.
Fed on hold, confidence up, but still in no rush
The Federal Reserve (Fed) left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its January 28 meeting, exactly as markets expected.
The tone, however, felt a touch more constructive. Indeed, policymakers sounded slightly more confident about growth, while still acknowledging that inflation remains somewhat elevated. Importantly, the Federal Open Market Committee (FOMC) no longer sees employment risks as deteriorating. Furthermore, the decision passed 10 to 2, with two dissenters favouring a 25 basis points cut.
In his press conference, Chair Jerome Powell made it clear that the current stance is seen as appropriate. That said, policy will continue to be decided meeting by meeting, with no preset path. In addition, recent inflation overshoots were largely attributed to tariff effects, while services disinflation is still viewed as progressing. Importantly, no one on the Committee is treating a rate hike as the base case.
European Central Bank steady, sticking to the script
The European Central Bank (ECB) also stayed on hold, leaving its three key rates unchanged in a unanimous and widely expected decision.
The message was calm and consistent. On that, the medium-term outlook still points to inflation returning to the 2% objective, and recent data have not materially altered that view. Additionally, wage indicators are showing signs of stabilisation, although services prices and pay dynamics remain under close scrutiny. The central bank continues to anticipate a modest dip in inflation in 2026, reinforcing the idea that it can afford to wait.
President Christine Lagarde described risks as broadly balanced and reiterated that policy remains data dependent and agile when she faced the usual Q&A from the media. The Governing Council acknowledged recent foreign exchange (FX) moves, judged them to be within historical norms, and stressed again that there is no exchange rate target. In short: policy is not on autopilot, but it is not in a hurry either.
Positioning: still euro positive, but losing momentum
Positioning remains skewed in favour of the Euro (EUR), although the momentum behind that bias appears to be fading.
According to the Commodity Futures Trading Commission (CFTC), speculative net long positions rose to around 163.4K contracts in the week to February 3, the highest level since August 2023. At the same time, institutional accounts, largely hedge funds, lifted short positions to nearly 218.5K contracts, levels not seen since May 2023.
Open interest edged lower to roughly 910.5K contracts. That subtle decline suggests participation may be plateauing rather than accelerating further.
Focus back to the US; dollar risks linger
Near term: The US Dollar remains the dominant driver, as labour market data, inflation releases and the broader geopolitical backdrop are likely to shape price action in the sessions ahead.
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. On the charts, a clear break below the 200 day Simple Moving Average (SMA) would increase the probability of a deeper corrective move.
Tech corner
In the daily chart, EUR/USD trades at 1.1859. The 55-day Simple Moving Average (SMA) rises above the 100- and 200-day SMAs, underscoring a bullish alignment. Price holds above these trend markers, with the 55-day SMA at 1.1744 offering initial dynamic support. The RSI stands at 55, above the midline, supporting upward momentum.
The slower 100- and 200-day SMAs slope higher at 1.1683 and 1.1632, reinforcing the broader uptrend and marking secondary support layers. The Average Directional Index at 31 indicates firm trend strength. Holding above the rising averages would keep the bias pointed higher, whereas a pullback through 1.1683 could expose the 1.1632 area.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line
For now, EUR/USD 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 morphing into a clean and sustained breakout.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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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.
