EUR/USD Price Forecast: Stuck in a range
- EUR/USD adds to Wednesday’s slight pullback and breaks below 1.1700.
- The US Dollar managed to leave behind part of the multi-day negative streak.
- The US NFP will not be released in light of the ongoing US federal shutdown.
EUR/USD retreated further on Thursday, breaking below 1.1700 as the Euro (EUR) came under renewed selling pressure. The pair touched weekly lows around 1.1685–1.1680, extending Wednesday’s slight pullback at the same time.
The move mirrored a rebound in the US Dollar (USD), with the US Dollar Index (DXY) snapping a four-day losing streak even as markets continued to weigh the fallout from the US federal government shutdown.
In the money markets, short-end Treasury yields moved higher, while the belly and long end eased back slightly. In Germany, 10-year bund yields broke below 2.70% to hit two-week lows.
Fed walking a fine line
The Federal Reserve (Fed) cut rates by 25 basis points on September 17, nodding to softer labour market conditions but still warning that inflation remains “somewhat elevated.”
The new dot plot leaned dovish: another 50 basis points of easing is pencilled in before year-end, with smaller cuts stretching into 2026–27. Growth forecasts were nudged up to 1.6%, unemployment stayed at 4.5%, and inflation projections were left unchanged.
Not all Fed members were on the same page. Incoming governor Stephen Miran pushed for a 50 basis points cut, but didn’t win support.
At his press conference, Chair Jerome Powell highlighted weaker job creation, softer household spending, and inflation running at 2.7% (headline PCE) and 2.9% (core). He pointed out that tariffs are keeping prices sticky, though services inflation is easing. Powell suggested the balance of risks is now “more balanced,” hinting the Fed is closer to neutral than starting a full easing cycle.
Speaking again on September 23, Powell stressed the balancing act: inflation could flare up again even as a weaker labour market pressures growth.
ECB not in a hurry
The European Central Bank (ECB) kept policy unchanged in September, sticking with its meeting-by-meeting approach. Officials judged inflation is broadly on track to converge to the 2% medium-term target. Core inflation is expected to average 2.4% in 2025, before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde described the current stance as being in a “good place,” with risks balanced on both sides. She reiterated that future moves depend squarely on incoming data.
Trade tensions still bubbling
Trade is another piece of the puzzle. Washington and Beijing agreed to a 90-day truce that cooled tensions, but tariffs remain in place as the US still applies 30% duties on Chinese imports, while Beijing keeps 10% on US goods.
Meanwhile, the US and EU struck a limited deal: Brussels lowered tariffs on US industrial goods and opened more access for American farm and seafood exports. In return, Washington imposed a 15% tariff on most EU imports. The unresolved issue is autos, where the threat of new tariffs lingers.
Positioning turning cautious
Traders have been cutting back on Euro exposure. Commodity Futures Trading Commission (CFTC) data for the week ending September 23 showed net longs falling to 114.3K contracts, the lowest since July. At the same time, institutional net shorts narrowed to 165.8K contracts, while open interest climbed to a two-week high of 859.2K contracts.
Technical picture
Looking at the broader picture, EUR/USD appears mired in a consolidative phase, with bulls lacking strength or conviction to extend the uptrend beyond the 1.1900 barrier. While above the critical 200-day SMA at 1.1182, the pair’s short-term outlook should remain bullish.
That said, the next up-barrier sits at the 2025 ceiling of 1.1918 (September 17), while a surpass of this region should pave the way for a potential visit to the psychological 1.2000 round level.
Southwards, the loss of the weekly floor at 1.1645 (September 25) could put the transitory 100-day Simple Moving Average (SMA) at 1.1610 back on the radar, ahead of the weekly trough at 1.1574 (August 27) and the August valley at 1.1391 (August 1).
Momentum indicators lean bearish: the Relative Strength Index (RSI) slips back below the 50 yardstick, indicative that the bull run continues to lose momentum. In addition, the Average Directional Index (ADX) below 13, suggests that the trend remains quite weak for now.
EUR/USD daily chart
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What could shift sentiment?
EUR/USD may have scope to edge higher, but a breakout likely needs a clear catalyst: maybe a dovish Fed surprise, weaker demand for US assets, more confidence that the ECB is happy to stay on hold, or a breakthrough on trade.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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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.
