EUR/USD Forecast and News

EUR/USD now seems to have moved into a consolidative phase following the pair’s inability to clear the February highs north of 1.1900 the figure, somewhat stabilisng around or just below the 1.1800 region. As long as the key 200-day SMA near 1.1650 holds the downside, further gains should remain in the pipeline.

Monday’s late recovery in the US Dollar (USD) threatens the positive performance of EUR/USD and the rest of the risk complex.

Indeed, as market participants continue to digest Friday’s SCOTUS ruling against Predient Trump’s global tariffs, the Greenback seems to have been brought to life, trimminhg earlier losses and prompting EUR/USD to abandon the area of daily peaks in the 1.1840-1.1830 band and return to the sub-1.1800 zone.

In the current context, the US Dollar Index (DXY) trades with modest losses in the 97.60 region, building on Friday’s retracement although still flirting with the upper end of the monthly range.

Fed: steady hands, softer edges

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

What shifted, subtly but meaningfully, was the tone.

Indeed, policymakers sounded more at ease with the current state of the economy. Growth is holding up better than many feared, and crucially, the Federal Open Market Committee (FOMC) no longer sees employment risks as deteriorating. Inflation is still described as somewhat elevated, but the urgency has clearly eased.

The vote passed 10 to 2, with two dissenters favouring a 25 quarter point cut. That split is important. It tells you that while the centre of gravity is steady, the internal debate has not disappeared.

At the press conference, Chair Jerome Powell struck a measured note. Policy, in his view, is in a good place. Decisions remain strictly meeting by meeting, with no preset path. He downplayed recent inflation surprises, attributing much of the overshoot to tariffs, and reiterated that services disinflation continues to make progress. Just as important, no one on the Committee is treating a rate hike as the base case.

The message was clear. Confidence has improved, but there is no rush.

The January Minutes reinforced that picture. Most participants backed holding steady. Several indicated that further easing would likely be appropriate if inflation declines as expected, while others warned that hikes could still be warranted if price pressures prove sticky. Inflation is seen drifting back toward 2%, but not in a straight line.

With growth solid and the labour market stabilising, the Fed remains firmly data dependent, not leaning decisively toward aggressive cuts.

ECB: calm, consistent, unhurried

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

The communication felt steady, almost rehearsed. The medium-term outlook still points to inflation returning to the 2% target, and recent data have not materially altered that view. Wage indicators appear to be stabilising, although services inflation remains under scrutiny. The ECB still anticipates a modest dip in consumer prices in 2026, reinforcing the argument for patience.

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.

In short, the ECB is not on autopilot, but it is not in a hurry either.

Markets are pricing around 8 basis points of easing this year and broadly expect another hold at the March 19 meeting.

Euro positioning: conviction on both sides

Positioning in the Euro (EUR) is becoming more intense.

The latest Commodity Futures Trading Commission (CFTC) data show speculative net longs climbed to nearly 174.5K contracts in the week to February 17, the highest level since September 2020. On the surface, that looks like a strong vote of confidence in the single currency.

But the picture is more nuanced.

Hedge funds and other institutional accounts have also increased short exposure, pushing it to around 235.8K contracts, the highest since May 2023. When both longs and shorts rise together, it usually signals rising conviction on both sides, not a simple bullish extension.

Open interest has eased slightly to roughly 916.8K contracts, just below previous record highs. That suggests this is not a thin or fragile move. It is a genuine tug of war. Bulls see structural upside. Bears see vulnerability.

In that kind of environment, moves can extend, but reversals can be sharp if the narrative shifts.

What it means for EUR/USD

Net positioning still favours the Euro (EUR), but the build up in opposing shorts makes the path higher more complicated. The trade is more crowded, more sensitive, and more reactive to incoming macro catalysts.

What’s next

Near term: the US Dollar remains the dominant driver. Labour market data, inflation releases and geopolitical headlines are likely to dictate the tempo. The immediate calendar is light, with the weekly US jobless claims in focus, though comments from Fed officials could easily steal attention.

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. From a technical perspective, a decisive break below the 200 day Simple Moving Average (SMA) would raise the probability of a deeper corrective phase.