EUR/USD Price Forecast: Outlook remains bearish below 1.1670
- EUR/USD adds to Tuesday’s losses, hitting two-day lows around 1.1560.
- The US Dollar picks up extra pace, always underpinned by geopolitics.
- The US CPI matched estimates in February, up 2.4% YoY; core up 2.5% YoY.
Since being rejected from the yearly highs near the 1.2100 mark in late January, the short-term picture for EUR/USD has been steadily deteriorating. The pair’s recent break below the key 200-day Simple Moving Average (SMA) also suggests that further downside retracements could be in the pipeline in the short-term horizon.
EUR/USD remains on the back foot, building on Tuesday’s losses and receding toward the 1.1560 region, or two-day troughs, on Wednesday.
The pair’s extra weakness comes on the back of the resurgence of the bid bias in the US Dollar (USD), which appears in turn well propped up by the unabated tensions in the US-Israel-Iran military conflict and their implications on the geopolitical scenario and the economic landscape.
That said, the US Dollar Index (DXY) gathers fresh steam, adds to the previous day’s advance and reclaims the 99.00 hurdle and beyond, reaching at the same time new two-day peaks, all amid a firm bounce in US Treasury yields across the curve.
Fed: steady stance, flexible outlook
A “hold” decision from the Federal Reserve (Fed) at the March 18 meeting is now almost fully priced in, although markets still see around 32 basis points of easing by the end of the year.
At its previous meeting, the Federal Open Market Committee (FOMC) sounded noticeably more comfortable with the broader economic backdrop. Growth continues to hold up well, employment risks are no longer seen as deteriorating, and although inflation remains somewhat elevated, the sense of urgency around it has clearly eased.
Chair Jerome Powell described policy as being in a “good place”, reiterating that decisions will continue to be taken meeting by meeting. On tariffs, he acknowledged they remain a source of inflation noise while also pointing to ongoing disinflation in services. A rate hike is not the base case, but neither is an imminent pivot towards cuts.
The Minutes reinforced that balanced stance. Rate cuts remain possible if inflation continues to cool, although hikes have not been ruled out should price pressures prove more persistent than expected. In other words, the Fed remains firmly data dependent.
ECB: cautious confidence
The European Central Bank (ECB) also left interest 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 close scrutiny, and further easing is projected into 2026.
Lagarde also highlighted resilient wage growth, a still-solid labour market and steady investment dynamics across the euro area. At the same time, she reiterated that while the ECB closely monitors the Euro (EUR), it does not target the exchange rate.
Markets currently price around 38 basis points of tightening by year-end, while a hold at the March meeting is almost fully discounted.
For now, the ECB appears broadly comfortable with its current policy stance while continuing to emphasise a cautious, data-dependent approach.
Positioning: Euro longs lose a bit of momentum
The latest Commodity Futures Trading Commission (CFTC) data suggest that bullish positioning in the Euro (EUR) has softened slightly.
Speculative net long positions dipped to roughly 136.5K contracts in the week ending March 3. This figure represents the smallest amount recorded in the past five weeks.
This implies that certain investors are becoming more cautious, scaling back their optimistic positions after the recent market surge.
Concurrently, institutional investors cut their net short positions to approximately 184.6K contracts, also a low not seen in several weeks. This suggests both sides of the market have been adjusting positions rather than signalling a clear directional shift.
Participation remains solid, as open interest ticked up a bit, reaching roughly 913.3K contracts, suggesting the market's still buzzing, even though speculative longs are easing off.
Positioning still leans positive on the European currency, though the enthusiasm seems to be waning a touch as investors take a fresh look at the bigger economic picture.
What’s next?
Near term: the US Dollar is calling the shots. The markets are still dealing with trade worries and persistent geopolitical strains, both of which are giving the Greenback a boost. Next on the US calendar are the Personal Consumption Expenditures (PCE) report, the weekly labour market figures and the preliminary University of Michigan sentiment gauge.
Risks: If global tensions remain high, the US Dollar's appeal might keep pressure on assets tied to risk. Technically speaking, a sustained dip beneath the 200-day SMA would likely boost the chances of a more significant downturn.
Technical corner
In the daily chart, EUR/USD trades at 1.1572. The near-term bias is mildly bearish as spot sits beneath the 55- and 100-day Simple Moving Averages (SMAs) clustered just above 1.17, while the 200-day SMA around 1.17 also caps the broader topside. The recent slide from the 1.19 area has pushed the Relative Strength Index (RSI) down toward 33, showing persistent bearish momentum without yet reaching extreme oversold conditions. The Average Directional Index (ADX) has turned higher toward 29, indicating that the developing downtrend is gaining strength rather than fading.
Immediate resistance stands at 1.1578, the nearest horizontal cap above price, with a break higher exposing the 1.1766 level, which aligns with the cluster of daily SMAs acting as a stronger barrier. Above there, 1.2082 is the next notable resistance before the longer-term caps at 1.2266 and 1.2350. On the downside, initial support emerges at 1.1491, followed by a secondary floor at 1.1469, where a clear violation would open the way toward the 1.1392 region. As long as the pair holds below the 1.1766 resistance area, the technical tone favors further downside probes into the mentioned support band.
(The technical analysis of this story was written with the help of an AI tool.)
All in all, the Dollar is still in control.
For the time being, EUR/USD is being influenced far more by what's happening in Washington than by events in Frankfurt.
Until the Fed’s policy path becomes clearer, or the euro area delivers a stronger cyclical upswing, rallies in the pair are likely to remain limited. At this stage, the US Dollar remains firmly in the driving seat.
Euro FAQs
The Euro is the currency for the 20 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.
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.
