EUR/USD Price Forecast: Recovery now needs to clear 1.1800

EUR/USD now seems to have woken up, attempting to leave behind the multi-day consolidative theme and prompting bulls to regain the upper hand in a context of renewed weakness hurting the US Dollar (USD).

EUR/USD rapidly leaves behind Tuesday’s hiccup, looking to clear the 1.1800 hurdle with conviction and therefore pave the way for a potential revisit to the monthly highs beyond the 1.1900 barrier sooner than later.

Meanwhile, sellers seem to have returned to the Greenback, dragging the US Dollar Index (DXY) to two-day troughs near 97.60 in tandem with declining US Treasury yields across different maturities.

Fed: comfortable, but not committed

The Federal Reserve (Fed) left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its late January meeting. No surprise. Markets were fully priced for a hold.

The shift was not in the decision but in the tone.

Policymakers sounded more at ease with the economic backdrop. Growth continues to outperform earlier fears, and, crucially, the Federal Open Market Committee (FOMC) no longer views employment risks as deteriorating. Inflation remains somewhat elevated, but the urgency has clearly softened.

The vote passed 10 to 2, with two members favouring a 25 basis point cut. That split matters. It shows the centre of gravity is steady, but the debate has not disappeared.

At the press conference, Chair Jerome Powell described policy as being in a good place and reiterated that decisions will remain strictly meeting by meeting. There is no preset path. He downplayed recent inflation surprises, attributing much of the overshoot to tariffs, while emphasising that services disinflation continues to progress. Importantly, no one is treating a rate hike as the base case.

The January Minutes reinforced that balance. Most participants backed holding steady. Several indicated that further easing would likely be appropriate if inflation declines as expected, while others noted that hikes could still be warranted if price pressures prove sticky.

With growth solid and the labour market stabilising, the Fed remains firmly data dependent rather than pivoting decisively towards aggressive cuts.

ECB: patience institutionalised

The European Central Bank (ECB) also left its three key rates unchanged in a unanimous and widely expected decision.

The message was disciplined. The medium-term outlook still points to inflation returning to the 2% target, and recent data have not materially altered that assessment. Wage pressures appear to be stabilising, though services inflation remains under close watch. The ECB continues to see a modest dip in consumer prices in 2026.

At her press conference, President Christine Lagarde described risks as broadly balanced. Policy remains agile and data dependent. The Governing Council acknowledged recent foreign exchange moves but judged them to be within historical norms, reiterating that there is no exchange rate target.

Markets are pricing just over 7 basis points of easing by year-end and broadly expect another hold at the March 19 meeting. In other words, patience is the policy.

Euro positioning: conviction on both sides

Positioning in the Euro (EUR) is intensifying.

Commodity Futures Trading Commission (CFTC) data show speculative net longs climbed to nearly 174.5K contracts in the week to February 17, the highest since September 2020.

At the same time, hedge funds and other institutional accounts lifted short exposure to around 235.8K contracts, the highest since May 2023. When both longs and shorts rise together, it signals rising conviction on both sides rather than a clean bullish extension.

Open interest eased slightly to roughly 916.8K contracts, just below record highs. This is not a thin rally. It is a genuine tug of war.

Net positioning still favours the Euro (EUR), but the increase in opposing shorts complicates the upside path. The trade is more crowded and more sensitive to incoming macro catalysts.

For now, EUR/USD remains primarily a US Dollar story.

What to watch

Near term: the US Dollar is still calling the shots. If US labour market numbers stay firm, inflation refuses to cool convincingly, or geopolitical tensions flare up, the Greenback will likely keep its grip on direction. Weekly jobless claims may not be blockbuster data, but in this environment even second-tier releases can move expectations. And Fed speakers? They can tilt the balance quickly if the tone shifts even slightly.

Risks: if the Fed remains cautious for longer, especially with solid US data backing that stance, the Dollar keeps a natural floor beneath it. That becomes particularly relevant against an ECB that is effectively sitting tight and waiting for clearer signals. From a technical perspective, a clean break below the 200 day Simple Moving Average (SMA) would change the texture of the move and open the door to a deeper correction.

Technical scenario

In the daily chart, EUR/USD trades at 1.1808. The near-term bias leans mildly bullish as spot holds above the 55- and 100-day Simple Moving Averages (SMAs) clustered around 1.1770–1.1690, while also keeping a clear distance from the rising 200-day SMA near 1.1660. This configuration suggests downside attempts are being absorbed above medium-term trend support, despite the Average Directional Index (ADX) easing back toward 19, which points to a weak trend environment. The Relative Strength Index (RSI) near 50 underscores balanced momentum, so further gains would require a decisive push from current levels rather than an extended trend move.

Immediate support stands at 1.1766, with a break exposing the next downside levels at 1.1578 and 1.1491, before deeper support emerges at 1.1469 and 1.1392. On the topside, initial resistance is located at 1.2082, followed by 1.2266 and then 1.2350. The nearby SMAs sitting just beneath the pair reinforce the 1.1766 area as a pivotal floor; holding above it would keep the modest bullish bias in place and leave scope for a retest of the 1.20 handle and the 1.2082 resistance barrier.

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

Bottom line: still a Dollar story

Right now, EUR/USD is being steered far more by Washington than by Frankfurt.

Until the Fed’s 2026 rate path becomes clearer or the euro area delivers a more convincing cyclical upswing, rallies are likely to feel measured rather than explosive.

For the time being, this remains Dollar first, Euro second.