EUR/USD Price Forecast: Some consolidation appears on the cards

EUR/USD found its footing on Tuesday, climbing back above the 1.1600 mark after starting the week on the back foot. The recovery came as the US Dollar (USD) lost some momentum and Treasury yields drifted lower, all while renewed US–China trade tensions kept markets on edge.

The US Dollar Index (DXY) hovered in a narrow range just north of 99.00, with upside attempts still capped near 99.50.

Trade tensions back in play

Hopes of easing tensions got a small boost after Treasury Secretary Scott Bessent said President Trump remains on track to meet Chinese leader Xi Jinping in South Korea later this month. The planned meeting could offer a pause in what looked like another escalation in the trade conflict.

Late last week, markets braced for the worst after China unveiled sweeping new restrictions on rare earth exports. Trump quickly responded with talk of triple-digit tariffs on Chinese goods, a move that rattled investors and reignited fears of a full-blown trade war between the world’s two largest economies.

Since then, both sides have tried to calm the waters. Bessent and China’s Commerce Ministry highlighted ongoing talks and coordination between their teams, hinting that there’s still room for progress from the current tariff truce.

Central banks keep their guard up

Across the Atlantic, the Federal Reserve (Fed) trimmed rates by 25 basis points on September 17, acknowledging softer labour data but noting that inflation remains “somewhat elevated”.

The updated dot plot leaned dovish, signalling another 50 basis points of easing before year-end and smaller cuts through 2026–27. Growth was revised up slightly to 1.6%, unemployment held at 4.5%, and inflation forecasts were unchanged.

Not everyone agreed with the move: incoming governor Stephen Miran had pushed for a larger half-point cut but couldn’t sway the committee.

At his press conference, Chair Jerome Powell pointed to slower job creation and softer household spending, with headline PCE inflation at 2.7% and core at 2.9%. He said tariffs were keeping certain goods prices sticky even as services inflation cools, suggesting that the balance of risks now looks “more even.” That could mean the Fed is nearing a neutral stance rather than the start of a full easing cycle.

The September FOMC Minutes backed that tone. Policymakers see room for more cuts if needed but are in no rush. Most backed the quarter-point move, though several voiced concern about slower hiring and easing price pressures — signs the Fed remains open to acting again if conditions worsen.

Powell reiterated on Tuesday that fewer companies are now looking to hire, a trend that could point to deeper problems for the jobs market. He said the Fed will continue making decisions “one meeting at a time,” weighing softer labour data against inflation that’s still running well above the 2% target. He also noted that much of the current price pressure comes from tariffs rather than broader demand-side inflation.

Meanwhile, in Europe…

The European Central Bank (ECB) also stayed cautious. At its September meeting, the bank left policy unchanged and reaffirmed its meeting-by-meeting approach. Officials said inflation is still expected to return to the 2% target over time, with core inflation projected to average 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.

President Christine Lagarde described policy as being in a “good place” and said risks are broadly balanced, stressing that any further moves would depend entirely on incoming data.

The ECB’s September meeting Accounts echoed that sentiment, showing little appetite for another rate cut anytime soon. Policymakers acknowledged the high level of uncertainty but struck a slightly more upbeat tone on euro area growth. For now, further easing would require a clear deterioration in data — despite the ongoing risks from US tariffs.

Traders growing wary of the Euro

Market positioning suggests investors are becoming more cautious on the euro. With Commodity Futures Trading Commission (CFTC) data still delayed by the US government shutdown, the latest available figures as of September 23 showed net longs on the EUR at their lowest since July, with a parallel drop in net shorts from institutional investors.

Technical picture

EUR/USD seems to have met some contention around the 1.1550 zone for now.

In case of further losses, the pair might revisit the August floor at 1.1391 (August 1), ahead of the weekly low at 1.1210 (May 29), which seems underpinned by the proximity of the key 200-day SMA.

On the other hand, bulls are expected to meet immediate resistance at the October top at 1.1778 (October 1), prior to the 2025 ceiling of 1.1918 (September 17).

In the meantime, the constructive tone in the pair is expected to remain in place while it trades above the 200-day SMA at 1.1233.

Momentum indicators favour further losses in the short-term horizon: the Relative Strength Index (RSI) retreated to around 43, leaving the door open to extra decline. Additionally, the Average Directional Index (ADX) above 18 indicates the trend could be gaining strength.

EUR/USD daily chart

Waiting for direction

EUR/USD might see some short-term rebounds, but a strong catalyst is still missing. A dovish surprise from the Fed, softer demand for US assets, a patient ECB, or progress on trade talks could all help tilt sentiment and give the single currency and the pair some breathing room.