Strong U.S. economic growth and higher Treasury yields have put the Federal Reserve in a more hawkish stance, widening interest rate differentials over European assets The EUR/USD's fall to 14-week lows mainly reflects economic fundamentals, even though daily momentum indicators now show oversold technical conditions. A quick reversal appears unlikely without softer U.S. data or clearer signals that the Fed will pause. Any rebound will likely be modest as long as the broader downtrend continues. The euro had a tough month, with EUR/USD falling for three straight weeks. The pair hit its lowest point since late July, near 1.1360, quite a drop from its August high over 1.1700. This left many wondering if the recent selling pressure went too far.
Market factors do seem to support the downtrend, but the speed of the fall deserves a closer look.
Why the Dollar Is Winning The dollar’s strengthening is a main driver here. Markets largely expect another Federal Reserve interest rate hike at its next policy meeting, with roughly a 70% chance or more. Strong US economic data and Treasury yields, consistently over 5% on longer-term maturities, support this outlook.
US producer prices climbed 5.4% year-on-year in August, adding to expectations for more Fed rate hikes. The European Central Bank’s quarter-point rate increase on September 10 then had little effect on the euro and the dollar’s strength simply overshadowed it.
After September’s rate hike, which pushed the federal funds rate to 3.75%-4.00%, expectations for further Federal Reserve monetary tightening solidified.
Europe faces its own economic headwinds. As a net energy importer, the region has been hit particularly hard by the Middle East conflict. For instance, Europe’s headline inflation rose to 3.3% in August, with energy prices climbing 14.3%.
Is this Justified or Overdone? The euro’s recent drop seems mostly due to widening interest rate differences between the US and the Eurozone, plus the dollar’s renewed strength.
Eurozone economic data hasn’t worsened enough by itself to explain such a big currency shift. Instead, markets are now focused on strong US economic growth, higher Treasury yields, and ongoing geopolitical worries.
But some indicators suggest the recent sell-off might have gone too far. Technically, EUR/USD shows a daily Relative Strength Index (RSI) nearing 25.85 on its current daily chart.
This oversold level suggests the decline might be hitting its short-term bottom. Current market behavior seems to worsen the euro’s existing economic disadvantages instead of creating new ones.
Could We See A Near-Term Reversal? Upcoming economic data, like US inflation reports, Eurozone price index readings, and more comments from central bank officials, will be key to figuring out whether the dollar keeps climbing. A string of weaker US economic data or clearer signals from the Federal Reserve about potentially pausing rate hikes could spark a recovery rally for the euro.
For the current EUR/USD trend to truly reverse, it’ll likely need more than just good Eurozone economic numbers or careful statements from the ECB. Without those clear catalysts, a lasting upward move in the next few trading sessions isn’t very likely.
Why has EUR/USD fallen for three consecutive weeks?
The US dollar has gotten stronger. This is due to expectations of Federal Reserve tightening, higher Treasury yields, and geopolitical energy risks. These factors simply overshadowed developments in the eurozone.
Are eurozone fundamentals the main cause of the drop?
Not really. The decline mostly shows investors shifting funds into US assets, rather than a sudden, sharp downturn in eurozone economic data.
Is the current EUR/USD decline justified?
Yes, the move makes sense. Different interest rates and the dollar’s overall appeal support this decline. The quick sell-off, however, certainly amplified the reaction.
Elevated U.S. inflation and frequent issuance of U.S. Treasuries have driven the 10-year U.S. Treasury note yield above 3.6% and put a lid on bonds, supporting the greenback. The U.S. Dollar is set for a strong month.
It is true that major rises in energy costs as a result of the conflict in Iran have hurt the euro recently. Along with rising geopolitical tensions, French bonds are once again far less attractive than their German counterparts, pushing yields up by 115 basis points. The euro looks set for its worst monthly performance against the dollar in over a year.
Looking at sterling, Britain’s budget deficit remains large, but recent actions by the government have signaled a greater commitment to reigning in spending. Along with signs of tighter spending, Bank of England data has shown that unsecured consumer lending picked up in August. This raises concerns about the health of the UK labor market, and further complicates the challenges posed by the Bank’s efforts to control inflation.
Looking at these factors, the dollar has a moderately bullish bias against the euro and a bearish bias against the pound. Major moves in either currency are expected to come from the release of the U.S. PCE report and the jobs report on Friday.
U.S. Dollar Index Technical Analysis: DXY Holds 101.33 as 101.61 Becomes the Next Upside Test
The short‑term Elliott Wave outlook for EURUSD indicates that a five‑wave impulsive structure is developing from the August 21, 2026 high. From that peak, wave (i) concluded at 1.1566, followed by a corrective rally in wave (ii) that terminated at 1.1654. The pair then resumed its decline in wave (iii), which is unfolding with internal subdivision into another five‑wave sequence of lesser degree. Within this sequence, wave i ended at 1.145, while wave ii retraced modestly to 1.1495.
The market continued lower in wave iii, reaching 1.1359, before a brief rally in wave iv that ended at 1.141. Current price action suggests that wave v of (iii) is nearing completion. Once this segment concludes, EURUSD should enter a corrective bounce in wave (iv), which will provide temporary relief before the broader decline resumes. In the near term, as long as the pivot at 1.1654 remains intact, rallies are expected to fail within corrective formations of three or seven swings. This reinforces the bearish outlook and signals that further downside remains likely.
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The Euro-Dollar has slipped into Lloyds' critical support zone, putting the June low in focus as Goldman forecasts further losses over six months. The Euro to Dollar (EUR/USD) exchange rate has reached the support zone Lloyds says could determine whether the decline becomes a broader reversal of the 2025-26 rally.
EUR/USD traded around 1.1334 on Tuesday afternoon, down 0.34% from Monday's close after touching 1.1329 intraday.
That leaves the pair below Lloyds' initial 1.1340-1.1354 support band but still above June's 1.1325 low.
The bank's warning is conditional:
"If we see a failure of 1.1325-54 it would suggest a broader reversal of the 2025-26 rally is underway, leaving 1.1214 exposed, but creating potential for a decline sub-1.1000."
Lloyds also identifies intervening support at 1.1276.
A move below 1.10 is therefore a technical risk following a breakdown, with no deadline attached.
Image: EUR/USD intraday chart Goldman Sachs supplies a more moderate, dated forecast path of 1.14 in three months and 1.12 at both six and twelve months.
Its six-month projection implies roughly 1.2% downside from Tuesday's level, although the three-month call allows a modest rebound first.
In its broader Dollar assessment, Goldman identifies the conditions that could strengthen the US currency further:
"On the other hand, we see risks to the upside from more pronounced inflation pressures or a more prolonged capital expenditure cycle that would require stronger policy steps to tighten financial conditions."
The latest decline also brings EUR/USD close to the 1.1320-1.1330 area highlighted by ING and JPMorgan last week.
ING's assessment linked downside risks to higher oil prices and stronger US data.
A recovery would need to clear Lloyds' 1.1411 resistance before challenging its more demanding reversal threshold:
"To really turn that tide we would need a recovery back through 1.1455/69, a tall order here."
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Key Points:EUR/USD pulled back as traders focused on the sell-off in debt markets. USD/CAD made an attempt to settle above 1.4200 amid falling demand for commodity-related currencies. USD/JPY remained stuck near the 157.50 level.
U.S. Dollar Rallies As Treasury Yields Test New Highs
DXY 290926 4h Chart U.S. Dollar Index gains ground as traders focus on rising Treasury yields and react to JOLTs Job Openings report.
The yield of 30-year Treasuries climbed above the 5.61% level as bond market sell-off continued. The yield of 10-year Treasuries tested new highs near the 5.29% level.
JOLTs Job Openings decreased from 7.335 million (revised from 7.271 million) to 7.079 million, compared to analyst forecast of 7.23 million.
Traders also had a chance to take a look at the CB Consumer Confidence report. The report showed that CB Consumer Confidence declined from 88.6 (revised from 89.4) in August to 81.9 in September, compared to analyst consensus of 89.2.
Currently, U.S. Dollar Index is trying to settle above the resistance level at 101.50 – 101.65. In case U.S. Dollar Index manages to settle above the 101.65 level, it will head towards the next resistance, which is located in the 102.35 – 102.50 range. RSI is in the overbought territory, but there is some room to gain additional upside momentum in the near term.
EUR/USD Tests Support At 1.1335 – 1.1350
EUR/USD 290926 4h Chart EUR/USD is losing ground as traders focus on the weaker-than-expected Euro Area Economic Sentiment Index report. The report indicated that Euro Area Economic Sentiment declined from 98.4 in August to 97.9 in September, compared to analyst consensus of 99.
EUR/USD attempts to settle below the support at 1.1335 – 1.1350. If EUR/USD manages to settle below the 1.1335 level, it will head towards the next support at 1.1250 – 1.1265.
GBP/USD Remains Under Pressure
GBP/USD 290926 4h Chart GBP/USD is moving lower as traders focus on general strength of the American currency. The pullback in the oil markets did not provide any support to GBP/USD as traders have mostly focused on the situation in debt markets.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts In case GBP/USD manages to settle below the 1.3200 level, it will head towards the support level at 1.3150 – 1.3165. RSI remains in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
USD/CAD Tests New Highs As Rally Continues
USD/CAD 290926 4h Chart USD/CAD continues to move higher as traders react to Canada’s GDP report. The report showed that GDP increased by +0.2% month-over-month in August, in line with analyst estimates. Other commodity-related currencies moved lower in today’s trading session.
Currently, USD/CAD is trying to setlte above the 1.4200 level. In case this attempt is successful, USD/CAD will head towards the next resistance, which is located in the 1.4235 – 1.4250 range.
USD/JPY Is Stuck Near The 157.50 Level
USD/JPY 290926 4h Chart USD/JPY is swinging between gains and losses despite rising Treasury yields. The market is stabilizing after the strong rebound from September lows.
The nearest resistance level for USD/JPY is located in the 158.00 – 158.50 range. If USD/JPY manages to settle above the 158.50 level, it will head towards the next resistance level, which is located in the 160.00 – 160.50 range.
On the support side, a move below the 50 MA at 157.48 will push USD/JPY towards the support at 155.00 – 155.50.
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The Rising channel and higher lows should continue to push the index higher in the near term, but should it break support at 100.67, the trend would likely be in question. Conversely, an upside break and daily close above 101.40 should have a high probability of bringing 101.65 and 101.89 into the equation in the near term.
EUR/USD Price Forecast
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GBP/USD Technical Analysis: Sterling Holds 1.3205 as 1.3250 Remains the First Recovery Hurdle
EUR/USD Price Chart – Source: Tradingview The EUR/USD pair is currently trading at 1.1362, and is showcasing further signs of weakness after recently sliding beneath the 1.1325 support zone. Below both of the moving averues, and in a lower high formation, the pair has further potential to the downside, and could still be in a short term formation.
I will be looking for the first significant level of resistance to be near the 1.1412 level. If the pair is able to rise above 1.1412, further resistance may come in near 1.1455, 1.1504 and 1.1558 respectively. If current support at 1.1325 is broken, further support may come in near 1.1266 and 1.1211.
While RSI has been showing some bullish signs near oversold territory, I believe further downside may be limited at the current time. If current support is broken, I may gain a bearish bias near 1.1266. I would gain a bearish bias near 1.1412 if it is tested and broken, and would need to see a bullish move above 1.1455 to negate my current bearish bias.
Key Points:EUR/USD is losing some ground as traders focus on the situation in debt markets. USD/CAD tested new highs amid sell-off in precious metals markets. USD/JPY climbed back above the 157.00 level.
U.S. Dollar Gains Some Ground As Treasury Yields Test New Highs
DXY 280926 4h Chart U.S. Dollar Index moved away from session highs as oil prices pulled back amid reports indicating that Saudi Arabia restarted the key East-West pipeline.
Rising Treasury yields served as the key catalyst for the forex market in today’s trading session. The yield of 2-year Treasuries climbed above the 4.92% level, while the yield of 10-year Treasuries settled near 5.25%.
Traders also had a chance to take a look at the Dallas Fed Manufacturing Index report. The report indicated that Dallas Fed Manufacturing Index declined from 11.6 in August to 9.8 in September, compared to analyst forecast of 1.
In case U.S. Dollar Index stays above the 101.00 level, it will head towards the next resistance level, which is located in the 101.50 – 101.65 range. A successful test of this level will open the way to the test of the next resistance at 102.35 – 102.50.
EUR/USD Attempts To Rebound From Multi-Week Lows
EUR/USD 280926 4h Chart EUR/USD is losing ground as traders focus on the sell-off in global bond markets. In the EU, Germany’s 10-year bond yield reached the highest level since 2009.
The nearest support level for EUR/USD is located in the 1.1335 – 1.1350 range. In case EUR/USD manages to settle below the 1.1335 level, it will head towards the next support, which is located in the 1.1250 – 1.1265 range.
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GBP/USD Gains Ground As Healey Promises Fiscal Discipline
GBP/USD 280926 4h Chart GBP/USD is moving higher as Chancellor John Healey promised fiscal discipline ahead of his debut budget, which would be released on October 28.
GBP/USD is heading towards the resistance level at 1.3285 – 1.3300. If GBP/USD climbs above the 1.3300 level, it will get to the test of the 50 MA at 1.3318. A move above the 50 MA will open the way to the test of the next resistance level at 1.3400 – 1.3415.
USD/CAD Tests New Highs
USD/CAD 280926 4h Chart USD/CAD continues to move higher as traders react to the strong sell-off in precious metals markets. Gold is down by -3.6%, while silver pulled back by almost 5%.
From the technical point of view, USD/CAD climbed above the resistance level at 1.4135 – 1.4150 and is trying to settle above the 1.4170 level. In case this attempt is successful, USD/CAD will head towards the next resistance, which is located in the 1.4235 – 1.4250 range.
USD/JPY Tests The 50 MA At 157.28
USD/JPY 280926 4h Chart USD/JPY is mostly flat as traders are evaluating their next moves amid global bond market sell-off. The magnitude of the sell-off has left traders wondering what to do next.
Currently, USD/JPY is trying to settle above the 50 MA at 157.28. In case this attempt is successful, USD/JPY will head towards the resistance level at 158.00 – 158.50. A move above the 158.50 level will open the way to the test of the next resistance at 160.00 – 160.50. It remains to be seen whether BoJ would be ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.
On the support side, a move below the 157.00 level will push USD/JPY towards the nearest support at 155.00 – 155.50.
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US dollar bulls returned in force last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. Meanwhile, futures traders increased bearish exposure to both the euro and British pound as the dollar rally gathered momentum.
View related analysis:
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How to Read the COT Report to Track Forex Market Sentiment
US Dollar Longs Surge as Euro and Pound Positioning Turns Bearish
Large Speculator Positioning from the COT report
Source: CFTC (COT), LSEG
US Dollar: Net-longs rose at their fastest weekly pace in seven years by $12.5 billion to $17.3 billion
EUR/USD: Asset managers reduced net-longs by 35k contracts and large specs increased net-shorts by 25k contracts
GBP/USD: Net-shorts increased a combined 50.5k contracts to mark their fastest weekly rise in three months
USD/JPY: Traders remained net-long by a combined 113k, despite a reduction of around 58k contracts last week
USD/CHF: Only minor adjustments kept net-short exposure to the Swiss franc by a combined 62.2k contracts
USD/CAD: Prices continued to fall at a faster pace than net-shorts increased, suggesting the late surge of gross-longs have since been forced to cover
AUD/USD: Open interest fell at the fastest weekly pace on record, though net-short exposure only increased marginally
NZD/USD: Large specs and Asset managers reverted to net-short exposure
Asset Manager Positioning | COT Report
Source: CFTC (COT), LSEG
FX Futures Positioning | COT Report (IMM Data)
US Dollar Index (DXY) Futures Positioning | COT Report
We saw a strong influx of bullish bets on the US dollar last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. And I suspect we’ll see a further increase by the time the next COT report drops, given DXY was only up 0.4% by Tuesday’s close – and went on to rise a further 0.8% by Thursday’s high.
The US dollar index has now rallied 2.6% in 11 days, so I do not think Friday’s pullback is enough to call an end to this rally. Especially since neither the US dollar index nor net-long exposure is near a sentiment extreme.
Traders have a plethora of Fed members speaking this week, alongside ISM, NFP and PCE inflation. My guess at this stage is that they will show a strong economy with inflationary pressures, which leaves little room for Fed members to be any less hawkish than they have been since their last hike.
Source: CFTC (COT), ICE, LSEG
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EUR/USD Futures Positioning | COT Report
My assumption over the past few months that the euro had bottomed is on the brink of being invalidated. But with momentum moving aggressively towards those swing lows, we may not need to wait for the break to invalidate it. The way prices move to or from a level can sometimes be just as, or even more, important than the level itself.
Net-short exposure to EUR/USD futures rose to a five-week high among large speculators, nearly doubling after increasing by 25k contracts over the week. Asset managers reduced net-longs by 35k, resulting in an effective combined shift of around 60k contracts towards a more bearish euro position.
Source: CFTC (COT), CME, LSEG
GBP/USD Futures Positioning | COT Report
It appears the British pound wants to head for its range lows around 1.3150, judging by how bearish momentum is accelerating towards the June low. Gross shorts have been trending higher for a couple of years, yet interestingly, net-short exposure is not flashing an imminent sentiment-extreme warning. The US dollar remains in the driving seat, though diminishing odds of a BOE hike could also decide how quickly GBP/USD breaks that June low – if it takes that route.
Source: CFTC (COT), CME, LSEG
USD/JPY Futures Positioning | COT Report
I stand by my long-held assumption that we saw the low for the Japanese yen this year back in June. While it retraced lower for a second week, a bullish hammer formed on the weekly chart, suggesting the yen is trying to form a swing low.
While large speculators and asset managers trimmed gross longs, they’re not exactly in a rush to short this market after several rounds of intervention. Both sets of traders remain net-long, which supports my ‘buy the dip’ bias for the yen and translates into a ‘fade the rally’ bias for USD/JPY.
Last week, the Fed’s rate hike expectation was reinforced after better than expected U.S. economic data showed further labor market strength. With the American workforce remaining at historically low levels, rate hikes are expected to continue until there is a material change in the U.S. inflation outlook. Similarly, other Fed officials have reiterated the need to control inflation.
The energy crisis creates difficult choices for central banks. For the ECB, the energy crisis pushes inflation up, but not enough to worry about prematurely tightening. Philip Lane was recently quoted saying that there is less of a need to aggressively hike rates, because the main drivers of inflation, wages and services, are not creating as much of a barrier as previously.
The BOE also has inflation that is too high and is expecting a prolonged energy shortage. The October policy meeting resulted in the bank rate being held at 3.75%, but the Bank of England left the door open to future rate hikes.
The Fed is still hiking rates, and the ECB and the BOE have both said they expect to hike rates in the future.
Fundamental bias: DXY moderately bullish, EUR neutral-to-bearish, GBP neutral-to-bearish.
U.S. Dollar Index Technical Analysis: DXY Holds 101.01 as 101.40 Remains the Next Upside Test
EUR/USD failed to stay above 1.1500 and extended losses. A bearish trend line is forming with resistance at 1.1425 on the 4-hour chart. GBP/USD declined heavily and traded below 1.3320. USD/JPY struggled to climb above 159.00 and corrected some gains. EUR/USD Technical Analysis The Euro struggled to stay in a positive zone against the US Dollar. EUR/USD started a fresh decline and traded below the 1.1465 support.
Looking at the 4-hour chart, the pair settled below 1.1450, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The bears even pushed the pair below 1.1380. A low was formed at 1.1359, and the pair started a consolidation phase.
On the upside, immediate resistance could be 1.1420. There is also a bearish trend line forming with resistance at 1.1425. The trend line is close to the 23.6% Fib retracement level of the downward move from the 1.1654 swing high to the 1.1359 low.
A close above the 1.14250 resistance could spark a recovery wave. The next major hurdle might be 1.1455. The main resistance could be 1.1500 and the 100 simple moving average (red, 4-hour).
A close above 1.1500 could start another steady increase. In the stated case, the bulls could aim for a move to 1.1550. If the pair stays below 1.1450, there could be a fresh decline toward the 1.1360 zone. The first major support might be 1.1320. A close below 1.1320 might accelerate the decline. In the stated case, the bears could aim for a move to 1.1240.
Looking at GBP/USD, the bears remained in action, pushed the pair below 1.3250, and they might aim for a move to 1.3150.
Upcoming Key Economic Events:
Dallas Fed Manufacturing Business Index for Sep 2026 – Forecast 11.5, versus 11.6 previous.
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Key points for the Euro 2026 Q2 outlook
The Fed delivered its first rate hike since 2023 in September, with updated projections reinforcing expectations for additional tightening into year-end.
The ECB has raised rates twice this year as policymakers confront persistent inflation pressures alongside increasing risks to the growth outlook.
The policy backdrop continues to favor the U.S. dollar, although the relative pace of Fed and ECB tightening will be critical for EUR/USD through Q4.
EUR/USD has reversed more than 3% from the August high, bringing the pair back to the same major support region that underpinned the Q3 recovery.
Monthly momentum is deteriorating into the quarterly close, raising the stakes for the October open as Euro tests a pivotal technical threshold.
EUR/USD enters the fourth quarter at a critical juncture after the summer recovery gave way to renewed selling into the close of September. The fundamental backdrop remains challenging as both the Fed and ECB confront persistent inflation, although differences in growth, policy expectations, and the pace of additional tightening could prove increasingly important into year-end. With Euro once again testing a major technical threshold, the coming quarter will hinge on whether the recent decline can stabilize or develops into a broader correction.
Fed Keeps Price Stability Front and Center
In September, the Federal Reserve raised its target range by 25 basis points to 3.75%–4.00%, marking the first rate increase since 2023. The decision was unanimous, with the accompanying policy statement highlighting solid economic activity, resilient domestic spending, strong productivity growth, robust capital investment, and a steady labor market. During the subsequent press conference, Fed Chair Kevin Warsh reaffirmed the central bank’s commitment to restoring price stability as inflation remains above target for a fifth consecutive year.
Warsh pointed to three developments since the previous meeting: evidence that the economy had strengthened, little evidence that underlying inflation trends had improved, and a changed geopolitical backdrop. He stressed that the Fed looks at trends across a range of information, not just an individual data release, and declined to signal a preset sequence of moves. Warsh characterized the rate hike as removing “a dose of accommodation,” while noting that he was hard-pressed to describe broad financial conditions as restrictive.
FOMC Summary of Economic Projections
Source: FOMC
The Fed Chair’s remarks reinforced expectations for a more aggressive tightening cycle, with the updated Summary of Economic Projections (SEP) pointing to a resilient labor market, stronger economic growth, and more persistent inflation through the end of 2026. The latest projections also show a median federal funds rate of 4.1% through year-end 2027, before gradually declining in 2028 and 2029. Taken together, the forecasts reinforce a higher-for-longer policy outlook, with additional tightening still projected before year-end.
FOMC Interest Rate Dot Plot
Source: FOMC
The September dot plot shifted markedly higher from June, with twelve participants now see the rate at 4.125% by year-end, while four project 4.375% and two see it holding at 3.875%. The shift signals a stronger bias toward further tightening, with most policymakers now projecting at least one more quarter-point increase before year-end.
Fed Fund Futures- FedWatch Tool
Source: CME
As a result, markets are now pricing a 68% probability of another 25-basis-point Fed hike in October, with the odds of a third increase by December approaching 58%. The increasingly hawkish Fed outlook has strengthened the policy backdrop for the U.S. dollar, creating a significant headwind for EUR/USD and making it more difficult for the pair to stabilize before mounting a meaningful recovery into year-end. With additional tightening still on the table, the evolution of inflation and the relative Fed-ECB policy path will be critical in determining whether the dollar can extend its recent advance.
ECB Policy Caught Between Inflation and Growth
The European Central Bank has delivered two 25-basis-point hikes so far this year: in June, then again in September, lifting the deposit rate to 2.50%. The ECB has adopted a more restrictive policy stance as the Middle East conflict and associated energy shock intensify inflation risks across the Eurozone. The Governing Council expects inflation to remain above target for an extended period, with President Christine Lagarde emphasizing that risks remain tilted to the upside for prices and to the downside for growth.
ECB Staff Inflation Projections
Policymakers are closely monitoring the magnitude and duration of the energy shock, particularly the extent to which higher costs feed through to broader prices and wages. The baseline shows headline inflation peaking this year, while core inflation edges higher into 2027 before easing.
ECB Staff GDP Growth Projections
For now, the Eurozone economy has remained resilient, supported by broad-based second-quarter growth, improving consumer confidence, and public spending. At the same time, headline inflation accelerated to 3.3% in August from 2.9% in July, reinforcing concerns over persistent price pressures. While the ECB has not pre-committed to another increase, markets are increasingly positioned for further tightening, with traders pricing roughly a 93% probability of a December hike that would lift the deposit rate to 2.75%. A deterioration in growth or moderation in energy-driven inflation, however, could challenge those expectations
The policy backdrop continues to favor the U.S. dollar, with the federal funds target range at 3.75%–4.00% compared with an ECB deposit rate of 2.50%. But for EUR/USD, the current rate differential may be less important than how that gap evolves into year-end. The ECB’s increasingly hawkish response to persistent inflation provides some fundamental support for the euro, while the Fed’s own tightening bias continues to underpin the greenback. With both central banks leaving the door open to further action, the relative pace of tightening—and the incoming inflation and growth data driving those expectations—will likely remain a key catalyst for EUR/USD through the fourth quarter. That said, the technical backdrop puts EUR/USD back at a major inflection zone into the close September, and the focus is on whether the bulls can stabilize this recent decline heading into the close of the year.
EUR/USD Technical Outlook: Q4 Outlook Hinges on Make-or-Break Support
Euro Price Chart – EUR/USD Monthly
Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView
In our 2026 EUR/USD Q3 Outlook, we noted that Euro was testing critical support into the close of June at 1.1355/94- a region defined by the 38.2% retracement of the 2025 advance, the 2025 April high close, and the July low. We highlighted, “The risk / focus is on possible inflection off this zone into the start of Q3. From a trading standpoint, a good zone to reduce portions of short exposure / lower protective stops..” EUR/USD registered a close low at 1.1369 the following month before rebounding sharply with the rally extending more than 3.4% off the yearly low. The bulls exhausted just head of the yearly open in mid-August before plunging more than 3% with price once again testing key support into the close of the quarter. The focus remains on a possible inflection from this threshold heading into the October open.
EUR/USD Monthly RSI (14)
Note that monthly momentum has now fallen to the lowest levels since March of 2025 with RSI attempting to break below the 50-level. A monthly close below 1.1355 alongside a momentum break below 50 would be needed to signal that a deeper correction may be unfolding within the broader uptrend from 2022.
Euro Price Chart – EUR/USD Weekly
Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView
A closer look at the weekly chart shows EUR/USD continuing to trade within the confines of a descending pitchfork extending off the yearly high. A reversal off the 75% parallel in August has broken the median-line with Euro trading just above support into the close of September at the 38.2% retracement and the April high week close (HWC) at 0.. A break / weekly close below this threshold exposes subsequent support objectives at the 2023 high close at 1.1228 and 1.1110/64- a region defined by the 38.2% retracement of the broader 2022 advance, the 2024 high-week close (HWC), and the 2025 May low-week close (LWC). Note that the 25% parallel of the broader uptrend converges on this threshold into the close of the year. Look for a larger reaction there IF reached. The next major technical consideration rests with the 100% extension of the January decline neat 1.0954.
Resistance is now eyed back at the January swing low at 1.1578 and is backed by the August high-week close at 1.1679. Note that the 75% parallel of the yearly pitchfork converges on this level in mid-October and a breach / weekly close above would be needed to suggest a more significant low is in place, and a larger recovery is underway. Subsequent resistance objectives are eyed at the yearly open, the 2025 HWC and the 2025 high close at 1.1745/75, and the 2025 high close at 1.1850. Strength surpassing this level would invalidate the yearly downtrend and mark potential resumption of the 2025 uptrend towards 1.1917 and 1.2020.
Bottom Line: EUR/USD is trading just above pivotal support into the close of Q3, and the focus is on possible inflection off this zone for guidance into year end. A good zone to reduce portions of short exposure / lower protective stops. From a trading standpoint, rallies would need to be limited to 1.1578 IF price is heading for a break lower on this stretch with a close below 1.1355 needed to fuel the next major leg of the decline.
--- Written by Michael Boutros, Senior Market Analyst
Rabobank's Euro recovery forecast depends on a retreat in Fed hike expectations, while the Iran war constrains near-term gains. Rabobank has lowered its one-month Euro forecast from 1.16 to 1.14, while retaining a three-month recovery target of 1.16.
The Euro to US Dollar exchange rate (EUR/USD) stood near 1.1377 on Thursday, down 0.04% on the day after Wednesday's 0.58% decline.
Latest — Exchange Rates:
Euro to Dollar (EUR/USD): 1.137217 (-0.08%)
Pound to Dollar (GBP/USD): 1.321229 (-0.20%)
Dollar to Yen (USD/JPY): 158.86911 (+0.38%)
The bank highlighted how far the Dollar's performance has departed from expectations:
"Clearly, the market had not expected that the USD would be entering the final quarter of the year on the front foot."
Rabobank argues that European growth has held up, but energy risks discourage investors from rebuilding Euro positions:
"That said, we retain the view that the EUR will struggle to find upside momentum during the duration of the Iran war and have revised down our 1 month forecast to 1.14 from 1.16."
That leaves even the reduced forecast slightly above spot, with June's annual low of 1.1325 just over half a cent away.
Image: EUR to USD intraday chart The bank estimates markets now assign roughly a 70% chance to an October Fed hike, following September’s increase.
Although the eurozone composite PMI rose to 53.1 in September, Rabobank says stronger US survey results have overshadowed Europe’s improvement.
Its recovery case rests on investors expecting more US tightening than the Fed ultimately delivers:
“Our expectation that EUR/USD will return to 1.16 on a 3 month view reflects the Rabobank house view that the market has priced in too much Fed policy tightening.”
That broadly aligns with ING’s 1.160 year-end call, discussed in our earlier comparison with Goldman Sachs.
Goldman’s three-month target is 1.14, falling to 1.12 at six and twelve months.
Rabobank’s 1.16 would require a recovery of approximately 2%, but the bank cautions:
“Next year’s French Presidential election may also limit potential for the EUR. We will be reviewing our EUR/USD forecasts in the coming weeks.”
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
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EURUSD edged higher on Thursday morning as bears take a breather after the latest three-day bear leg which accelerated on Wednesday, resulting in 0.5% daily fall.
The Euro remains under increased pressure from growing expectations for more aggressive Fed’s stance on monetary policy, which was additionally boosted by much better than expected US flash PMI data for September.
Oversold daily studies likely prompted profit-taking, which so far showed very limited action and are unlikely to dent larger bears but rather to mark positioning for fresh push lower.
The pair rides on extended third wave of five-wave cycle from 1.1711 (Aug 28 top) that pressures its 200% Fibo expansion (1.1362) and nearby July 28 low (1.1353), guarding key support at 1.1324 (2026 low, posted on June 24).
Extended upticks should be capped under barriers at 1.1470/80 zone (broken Fibo 61.8% /daily cloud base / falling 10DMA) to keep bears intact and offer better levels to join larger downtrend.
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
EUR/USD fell to 1.1378 on Thursday, with the US dollar holding near a two-month high. The dollar has been supported by strong macroeconomic data, which have heightened inflation concerns and expectations of further Federal Reserve tightening.
According to S&P Global, US private sector business activity expanded at its fastest pace in more than five years in September. Improvements were recorded in both the services and manufacturing sectors, although price pressures also intensified.
Several Fed officials also backed last week’s rate hike and again highlighted inflation risks. Against this backdrop, markets now estimate the probability of another rate hike in October at approximately 70%, up from 55% the previous day.
Elevated oil prices remain an additional factor. Uncertainty surrounding US-Iran negotiations is keeping oil prices high and continuing to fuel inflation expectations.
Technical Analysis
On the H4 EUR/USD chart, the market completed a downward move towards 1.1369, followed by a corrective rebound to 1.1392. A consolidation range is now effectively forming between these levels.
A further move higher towards 1.1396 is possible, followed by a decline towards 1.1360.
The MACD indicator supports the short-term bearish scenario. Its signal line remains below zero and is pointing firmly downwards.
On the H1 EUR/USD chart, the market completed another downward move towards 1.1369. A consolidation range is currently forming above this level.
Another move higher towards 1.1396 is expected today.
The Stochastic oscillator supports this short-term corrective scenario. Its signal line remains above 50 and is pointing firmly upwards towards 80.
Conclusion EUR/USD has fallen to a two-month low as the US dollar continues to benefit from strong US economic data and hawkish Fed signals. US private sector activity expanded at its fastest pace in more than five years in September, intensifying inflation concerns and pushing the estimated probability of an October rate hike to around 70%. Elevated oil prices, amid uncertainty surrounding US-Iran negotiations, are adding further pressure to the inflation outlook.
From a technical perspective, EUR/USD may see a short-term corrective move towards 1.1396. Once this move is complete, the H4 scenario envisages a renewed decline towards 1.1360. The near-term direction will depend on upcoming US data and Fed commentary, with the US dollar likely to remain supported in the current environment.
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Strong economic data bolstered expectations for another large rate hike next month. The latest CME Group data shows the odds for a 75 basis point hike in October are now at 66 percent. A 50 basis point hike was considered more likely earlier in the week.
Multiple Fed officials spoke yesterday and reiterated the need for further rate increases. Governor Barr said that rate increases would continue until inflation is more in line with the Fed’s 2 percent target. The other members of the Fed who spoke yesterday all gave similar remarks and said that the recent economic data justified the need for continued rate hikes to combat inflation.
The dollar has stronger nearby drivers of demand than the euro. The European Central Bank (ECB) hiked rates last month, but has signaled no strong preference to raise rates again. Bets against the euro could pay off if energy prices keep falling and further easing measures are put in place.
Sterling is more balanced. The Bank of England (BoE) held rates steady at 3.75% last week, but revised its outlook to more hawkish. The BoE and other hawkish central banks give the British currency some protection against falling energy prices. Barclays and UBS expect an interest rate hike by the BoE in November.
Ongoing Middle East diplomacy will also influence inflation. Falling energy prices should ease inflation across the U.S., Europe and Britain, which could impact rates set by the three central banks.
Overall, we have a DXY bullish bias, bearish EUR and GBP bias.
TL;DR: October Fed hike odds have surged to 69.7% on a booming flash PMI, driving the 2-year and 10-year Treasury yields to fresh multi-year highs—and pushing EUR/USD toward a structural decision zone at 1.1323–1.1353.
Markets Pull the Next Fed Hike Forward A booming US economy is increasingly looking like a bond-market problem. Expectations for another Federal Reserve hike at the October 28 meeting have surged to 69.7%, according to the latest FedWatch snapshot, up from 55.4% a day earlier, 48.7% a week ago, and just 8.8% a month ago. The repricing comes only a week after the Fed delivered its first hike since 2023, lifting the target range by 25bp to 3.75–4.00%. Markets are no longer simply debating whether the tightening cycle has further to run; they’re increasingly pricing back-to-back hikes.
Treasuries have responded accordingly. The 2-year yield has surged to around 4.89%, its highest since May 2024, while the 10-year has climbed above 5.10% to its highest since 2007. Wednesday’s rise in the 10-year was the largest one-day move since April 2025. The front end is being driven predominantly by the repricing of near-term Fed policy, while longer maturities are absorbing the same growth and inflation signal alongside concerns over Treasury supply and investor demand.
Hot PMI Turns Strong Growth Into a Hawkish Signal The immediate macro catalyst was an exceptionally strong September flash PMI report. PMI Manufacturing rose from 53.9 to 57.0, PMI Services from 56.5 to 58.7, and PMI Composite from 56.0 to 58.4, the latter reaching a 62-month high. Manufacturing output also accelerated from 53.1 to 56.7. S&P Global Chief Business Economist Chris Williamson said US business is “clearly booming now in both manufacturing and services,” with the survey consistent with roughly 5% annualized growth at the latest pace and around 4% for the third quarter as a whole.
But it was the inflation side that turned strong growth into a bond-negative signal. Backlogs rose sharply, hiring accelerated, and capacity strains intensified, while overall input-cost inflation reached its highest since October 2022. Williamson said firms’ input costs jumped at the steepest rate in four years, with fuel and transport costs rising sharply as oil prices climbed. That connects Wednesday’s rebound in Brent—settling up 3.86% at $103.08—directly back into the inflation picture rather than treating oil as a separate market story.
The mechanism is increasingly difficult for bond bulls: strong domestic demand is tightening capacity at the same time as higher energy costs are adding another layer of price pressure. That leaves the Fed with less reason to tolerate inflation staying above target, especially while employment remains resilient.
Fed Hawkishness and Weak Auction Demand Add to the Selloff The PMI landed on top of an increasingly hawkish run of Fed communication. Federal Reserve Governor Michael Barr said this week that policymakers had been “out of position” before the September hike and that, in his base case, “further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.” Alberto Musalem has described policy as being “on the accommodative side,” Susan Collins has backed another hike later this year, and Austan Goolsbee has warned that persistent supply shocks and excessive demand can’t simply be looked through.
The result is that incoming data and Fed rhetoric are now reinforcing each other rather than pulling in opposite directions. The September hike increasingly looks less like a one-off correction and more like the possible start of a renewed tightening sequence.
A weak $70bn 5-year Treasury auction then added another layer of pressure. The auction cleared at 5.033%, compared with a roughly 4.186% average across the previous six auctions, while indirect bidders took just 54%, versus an average around 65%. The 5-year sits in the belly of the curve rather than the long end, but the poor demand reinforced the broader message that investors require more compensation to absorb Treasury supply. The auction therefore amplified a selloff already fundamentally justified by stronger growth, higher inflation pressure, and rising Fed expectations.
ActionForex’s Technical View on the 2-Year Yield: Breaks Through 4.791% The technical breakout in the 2-year yield reflects how quickly markets have brought the next Fed move forward.
The yield has decisively cleared the 4.791% 100% projection of the rise from 3.679% to 4.370% projected from 4.100%. That was a key resistance level and had already been identified as the next major test after last week’s FOMC repricing.
Momentum remains strongly positive. Daily MACD continues to rise, while RSI near 79 is clearly overbought but hasn’t produced a topping signal.
The next target is the 138.2% projection at 5.055%, immediately above the psychological 5% level. Beyond there, the 161.8% projection stands at 5.218%.
The weekly structure raises an even larger question. The decline from the 5.259% 2023 high to 3.365% increasingly looks complete. Current momentum makes a retest of 5.259% increasingly plausible, but a break of that level would still be required before concluding the longer-term yield uptrend has resumed.
ActionForex’s Technical View on the 10-Year Yield: A Three-Way Resistance Cluster The 10-year yield is already at an even more immediate technical decision point.
At around 5.116%, it’s pressing directly beneath a tight resistance cluster:
5.122% — 100% projection of 3.926% to 4.687% from 4.361% The upper boundary of the medium-term rising channel 5.136% — 100% projection of 3.599% to 4.809% from 3.926% That 5.122–5.136% zone is therefore the key breakout area.
Daily RSI around 72 and weekly RSI around 76 show increasingly stretched momentum, so some consolidation would be normal. But overbought conditions aren’t themselves a reversal signal. As long as 4.920% support holds, the near-term structure remains bullish.
A decisive break through the 5.12–5.14% cluster would open the 138.2% projection at 5.413%.
The broader significance is already substantial. The 10-year has pushed above the 5.021% 2023 high, transforming the current move from another test of old resistance into a genuine multi-year breakout.
ActionForex’s Technical View on EUR/USD: Reaching a Structural Decision Zone The widening US yield advantage is now feeding directly into FX.
EUR/USD has accelerated lower toward the 1.1353 level, the 38.2% retracement of the rise from 1.0176 to 1.2081, with 1.1323 support immediately underneath. Together, the two levels create a compact 1.1323–1.1353 decision zone.
Daily momentum is deeply bearish. MACD has accelerated lower and RSI is already near 27, leaving the pair oversold enough for a short-term rebound but not yet providing evidence the decline is finished.
A decisive break through 1.1323 would first confirm resumption of the fall from 1.2081.
The more important implication lies on the weekly chart. The entire advance from the 0.9534 low in 2022 to 1.2081 can still be interpreted as a corrective three-wave rebound. EUR/USD failed around the 1.20–1.2081 resistance cluster, and a clear break through 1.1323 would materially increase the probability that 1.2081 completed that entire corrective rally.
Under that scenario, the next major medium-term downside objective would be the 61.8% retracement at 1.0904.
Payrolls and CPI Hold the Veto The cross-market chain is now unusually coherent: Brent back above $100 is feeding into fuel and transport costs; the PMI shows strong growth alongside renewed inflation pressure; Fed officials are arguing that more restraint may be necessary; October hike odds have climbed toward 70%; Treasury yields are breaking higher; and EUR/USD is approaching structural support.
The weak Treasury auction has intensified that move, but it didn’t create it.
The principal risk to the entire repricing is now incoming US data. A materially softer payrolls report or benign inflation print before the October FOMC could quickly pull hike probabilities lower and trigger consolidation in yields.
Absent that, the immediate technical tests are clear: 5.055% on the 2-year, 5.122–5.136% on the 10-year, and 1.1323–1.1353 on EUR/USD. A simultaneous break in yields and EUR/USD would turn this week’s repricing into something much more consequential.
Key Takeaways October Fed hike odds jumped from 8.8% a month ago to 69.7% now, driven by a 62-month-high flash PMI Composite reading of 58.4. Input-cost inflation hit its highest since October 2022, with Brent’s rebound to $103.08 feeding directly into fuel and transport costs, turning strong growth into a hawkish signal. A weak $70bn 5-year Treasury auction (5.033% clearing yield vs. 4.186% recent average) amplified, but didn’t create, a selloff already justified by growth and inflation data. The 2-year yield broke 4.791% resistance toward 5.055%, while the 10-year is testing a three-way 5.122-5.136% resistance cluster after clearing its 2023 high. EUR/USD faces a structural 1.1323-1.1353 decision zone; a break of 1.1323 would raise the odds the entire 2022-2026 advance from 0.9534 completed as a corrective rally, opening 1.0904 next.
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Euro Technical Outlook: EUR/USD Short-term Trade Levels
EUR/USD has fallen more than 2.9% from the August high after a decisive break of the September opening range.
Euro has declined in seven of the past nine sessions and is poised for a third consecutive weekly loss.
The selloff is approaching a major support zone near the yearly low-day close, where the risk of near-term exhaustion begins to rise.
A sustained break below support would strengthen the case for another leg lower, while a recovery through near-term resistance would suggest a more meaningful low may be forming.
U.S. Core PCE, Eurozone inflation and Non-Farm Payrolls highlight next week’s event risk.
Resistance 1.1419, 1.1472 (key), 1.1501- Support 1.1355/60 (key), 1.1325, 1.1275
EUR/USD remains under heavy pressure after the September range broke lower, extending the decline from the August highs toward the lowest levels since July. The broader technical picture remains bearish but increasingly stretched momentum and the approach of major support argue for caution in chasing the move at current levels. With several key macro releases on deck, the next reaction could prove critical in determining whether the selloff extends or begins to stabilize. Battle lines drawn on the Euro short-term technical charts.
Review my latest Weekly Strategy Webinar for an in-depth breakdown of this EUR/USD technical setup and more. Join live Monday’s at 8:30am EST.
Euro Price Chart – EUR/USD Daily
Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView
Technical Outlook: In last month’s Euro Short-term Technical Outlook we noted that EUR/USD had reversed off confluent uptrend resistance and that, “From a trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards 1.1564/78- rallies would need to be limited to the median-line IF price is heading lower on this stretch with a close below needed to fuel the next leg of the decline.” Euro dropped into support later that day with the September opening range taking shape just above pivotal support at 1.1564/78.
The range broke on September 14 with Euro plunging more than 2.9% off the August highs to trade at the lowest levels since July. The decline has taken momentum into oversold territory with the daily RSI trading at the lowest levels since June. Price has now fallen seven of the past nine-days with a third consecutive weekly decline now approaching pivotal support near the low-day close of the year. While the immediate decline may be a bit stretched, the outlook remains tilted to the downside while below the weekly high.
Euro Price Chart – EUR/USD 240min
Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView
Notes: A closer look at Euro price action shows EUR/USD trading within the confines of a descending pitchfork extending off the September high. The bears are approaching downtrend support here with major lateral support just lower at 1.1355/60- a region defined by the 38.2% retracement of the 2025 advance and the 2026 low-day close. Look for a larger reaction there IF reached with a break / weekly close below needed to fuel the next major leg of the decline. Subsequent support objective rest with the yearly swing low at 1.1325 and the 2023 swing high at 1.1276.
Initial resistance is now eyed back the 1.618% extension of the late-August decline at 1.1419 with near-term bearish invalidation now lowered to the 61.8% retracement of the June advance at 1.1472. This level converges on the upper parallel into the start of next week and a breach / daily close above this threshold would be needed to suggest a more significant low is in place, and a larger trend reversal is underway. Subsequent resistance objectives are eyed at the August swing low at 1.1501 with a breach above 1.1578 needed to put the bulls back in control.
Bottom line: Euro is approaching pivotal support near the low close of the year, and the focus is on a reaction at this key inflection zone. From a trading standpoint, rallies would need to be limited to 1.1419 IF price is heading lower on this stretch with a daily close below 1.1355 needed to fuel the next leg lower.
Event risk remains elevated for EUR/USD into the close of the week, with President Trump hosting Chinese President Xi Jinping for a state visit Thursday. Traders will be focused on any progress—or renewed friction—over trade, tariffs, rare-earth/critical-mineral supply and investment, all of which could have implications for the dollar and broader risk sentiment. Attention then shifts to next week’s key macro releases, with U.S. Core PCE on Wednesday followed by Eurozone inflation and Non-Farm Payrolls Friday. With inflation and labor-market trends central to the Fed and ECB policy outlooks, the releases could materially reshape rate expectations on both sides of the Atlantic. Any meaningful divergence in the inflation data—or signs of renewed strength or weakness in the U.S. labor market—could shift the relative policy outlook and fuel a larger directional move in EUR/USD. Stay nimble into the monthly cross and watch the weekly closes for guidance. Review my latest Euro Technical Forecast for a closer look at the longer-term EUR/USD trade levels.
Key EUR/USD Economic Data Releases
Economic Calendar - latest economic developments and upcoming event risk.
Active Short-term Technical Charts
British Pound Short-term Outlook: GBP/USD Selloff Breaks June Uptrend
Canadian Dollar Short-term Outlook: USD/CAD Six-Day Rally Challenges Pivotal Resistance
Australian Dollar Short-term Outlook: AUD/USD Reversal Tests Key Uptrend Support
Gold Price Short-term Outlook: XAU/USD Bulls Fight to Stabilize at Pivotal Support
Japanese Yen Short-term Outlook: USD/JPY Breakdown Faces Major Test Ahead of Fed, BoJ
US Dollar Short-term Outlook: USD Selloff Accelerates Toward August Lows Ahead of NFP
Swiss Franc Short-term Outlook: USD/CHF Breakout Puts Yearly Highs Back in Play
--- Written by Michael Boutros, Senior Technical Strategist
EURUSD currency pair recently broke through the key support zone located between the support level 1.1500 and the 61.8% Fibonacci correction of the upward impulse wave (C) from August.
The breakout of this support zone accelerated the active minor impulse wave 3 of the intermediate impulse wave (3) from late August.
EURUSD currency pair can be expected to fall further toward the next support level 1.13, which reversed the price multiple times in July and target for the completion of the active impulse wave (3).
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EUR/USD falls to a 10-week low despite Eurozone growth picking up
EUR/USD has fallen to a 10-week low, down around 2.4% over the past month amid USD strength and despite stronger-than-expected Eurozone PMI data.
Eurozone PMI data showed that business activity grew at a faster pace in September. The service sector PMI rose to 53.0, up from 51.6 in August and ahead of expectations of 51.7. Manufacturing PMI remained unchanged at 52.7, in line with forecasts, while the composite PMI, considered a good gauge of overall business activity, rose to 53.1, defying expectations of a decline to 51.5 and hitting a 41-month high.
Even solid economic data is failing to offer support to the euro, which is coming under increasing pressure amid a growing Fed-ECB divide.
Last week, the Federal Reserve hiked interest rates by 25 basis points and signalled that another rate hike could come before the end of the year, offering further support to the greenback, which now trades at a seven-week high.
The euro has a more complicated backdrop. Inflation risks remain high owing to the jump in energy prices linked to tensions in the Middle East, increasing costs for both households and businesses. However, the ECB faces the difficult balancing act of keeping inflation under control while avoiding unnecessary pressure on a fragile economy.
ECB Vice President Vogt noted that persistent energy costs could eventually weaken consumption and economic growth. This contrasts with the more hawkish stance heard from Fed officials this week.
The Fed-ECB divergence remains a clear driver for EUR/USD. The Fed is gearing up for additional hikes, while the ECB has less room to manoeuvre. The market is now pricing in a 53% probability of another Fed rate hike at the October meeting.
EUR/USD forecast – technical analysis
EUR/USD has broken down below its rising channel and is trading below its 50 and 200 EMAs, keeping the technical picture bearish. The price has fallen to 1.1415 at the time of writing, as sellers look towards 1.1350, the July 27 low. A break below here opens the door to a deeper sell-off towards 1.1300.
Any recovery would first need to rise above 1.1500. Above here, attention turns to 1.1570, the 200 EMA and horizontal resistance. A break above this area would put the pair on a more stable footing.
Gold under pressure as a stronger USD offsets falling oil prices
Gold has fallen towards $4,320 on Wednesday as the market weighs the latest developments surrounding the Middle East, easing inflation fears and expectations for further Fed rate hikes.
Markets have been following the latest U.S.-Iran talks, with Iran setting conditions for reopening the Strait of Hormuz, while President Trump has hailed good progress in discussions. At the same time, Saudi Arabia is working to restore oil flows through the East-West pipeline. Together, these developments have helped Brent fall below $100 a barrel as supply concerns ease.
The drop in oil prices should ease inflationary fears and reduce pressure for further Fed rate hikes, which would normally be supportive for gold.
However, at the same time, the dollar is trading at a two-month high on expectations that the Federal Reserve will keep interest rates elevated for longer in order to curb persistent inflation.
The Fed hiked rates by 25 basis points last week and pointed to further rate hikes before the end of the year. Fed speakers this week have also been supportive of further tightening. Richmond Fed President Tom Barkin warned that inflationary shocks could take time to subside, while Boston Fed President Susan Collins said she supported last week's rate hike amid concerns that future inflation could remain above target. The market is pricing in a 53% probability of a Fed rate hike in October.
This hawkish stance has helped the dollar rise to a two-month high, putting pressure on U.S.-dollar-denominated gold. While gold is seen as a hedge against inflation, its appeal fades when higher interest rates increase returns on yield-bearing investments.
Elsewhere, China's gold imports through August surpassed 1,000 tonnes, already exceeding the full-year total for 2025, amid strong investment demand.
Markets will now look to U.S. PMI data for clues about the health of the U.S. economy. Strong economic activity combined with signs of continued price pressures could boost the dollar and put further pressure on gold.
Gold forecast – technical analysis
After breaking out of the symmetrical triangle pattern, gold ran into resistance around $4,700 before easing back towards $4,320, where it is consolidating around the 23.6% Fibonacci retracement of the move from the $5,998 high to the $3,940 low, as well as the 50 and 200 EMAs.
Sellers will need to break below this area to turn attention towards $4,200 and then $4,100, the March low. A break below $4,100 would shift attention towards $3,940, the 2026 low.
Should support hold, buyers will look towards $4,500 and then $4,575, the 38.2% Fibonacci retracement. A rise above $4,700 would create a higher high, with buyers then looking towards $4,770, the 50% Fibonacci retracement, before $5,000 comes into focus.
With the Fed’s current trajectory, which aims to reach a terminal rate of 4.25%-4.50%, and Barkin’s remarks, it is highly likely that the target range will rise by another 25 bps by the end of the year. Despite a recent increase in odds for a rate hike in October, which now stands at around 53%, the greenback has appreciated against a basket of peers.
Although higher interest rates in the U.S. are historically positive for the euro, the recent hikes by the ECB and dovish outlook by most of its members means that the ECB will be behind the curve for an extended period. Falling energy prices mean that inflation will become less of a concern for the euro area.
The Bank of England (BoE) is in a delicate situation regarding interest rates. The BoE believes that further disruptions to the energy market could result in higher rates. Last week, the BoE kept rates at 3.75%. Currently, the markets expect there is a 65% chance the BoE will raise rates in November. Most market participants expect the BoE to raise rates four times in the next two years, each time by a quarter of a percent. Recently, economic data out of the UK has surprised to the upside. In August, UK retail sales rose. Also in August, UK economic growth was higher than expected.
Oil prices have the potential to move other asset prices in the foreseeable future. The U.S. and Iran have been in talks and have signaled they are willing to resolve their differences. Lower oil prices may reduce inflation and cause central banks to slow their pace of tightening.
The DXY (USD index) has the potential to appreciate; the EUR and GBP are expected to depreciate.
U.S. Dollar Index Technical Analysis: DXY Holds Above 100.53 as 100.83 Becomes the Next Upside Test
Key Points:EUR/USD pulled back as Euro Area Consumer Confidence missed analyst estimates. GBP/USD tested new lows as pullback continued. USD/JPY gained ground, supported by rising Treasury yields.
U.S. Dollar Tests New Highs
DXY 220926 4h Chart U.S. Dollar Index gains ground as traders focus on Trump’s speech at UN General Assembly. President Trump said that he could make a deal with Iran but would destroy the country in case Iran refused to make a deal.
Brent oil rebounded towards the $100.00 level as oil traders reacted to Trump’s words. The rebound in the oil market raised demand for safe-haven assets, providing support to the American currency.
Hawkish comments from Fed’s Collins provided additional support to U.S. dollar. She noted that she supported the rate hike and warned about inflation risks.
Currently, U.S. Dollar Index is trying to settle above the resistance level at 100.50 – 100.65. In case this attempt is successful, U.S. Dollar Index will head towards the next resistance level, which is located in the 101.50 – 102.00 range.
EUR/USD Tests Support At 1.1420 – 1.1435
EUR/USD 220926 4h Chart EUR/USD tested new lows as traders focused on the Euro Area Consumer Confidence report. The report showed that Euro Area Consumer Confidence decreased from -15.5 in August to -16.5 in September, compared to analyst forecast of -16.
EUR/USD attempts to settle below the support at 1.1420 – 1.1435. If U.S. Dollar Index manages to settle below the 1.1420 level, it will head towards the next support level, which is located in the 1.1335 – 1.1350 range.
GBP/USD Remains Under Pressure
GBP/USD 220926 4h Chart GBP/USD is under pressure as traders stay bearish amid geopolitical tensions and inflation worries. There are no important economic reports scheduled to be released in the UK today, so traders will stay focused on general market sentiment.
The nearest support level for GBP/USD is located in the 1.3285 – 1.3300 range. If GBP/USD declines below the 1.3285 level, it will head towards the next support at 1.3150 – 1.3165. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
EUR/USD Price Forecast
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USD/CAD Tests Resistance At 1.4065 – 1.4080
USD/CAD 220926 4h Chart USD/CAD continues to move higher amid lack of positive catalysts for the Canadian dollar. Other commodity-related currencies are mixed in today’s trading session.
From the technical point of view, USD/CAD attempts to settle above the resistance level at 1.4065 – 1.4080. If USD/CAD manages to settle above the 1.4080 level, it will move towards the next resistance, which is located in the 1.4135 – 1.4150 range.
USD/JPY Moves Higher As Treasury Yields Rise
USD/JPY 220926 4h Chart USD/JPY gains some ground as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed back above the 4.75% level, while the yield of 10-year Treasuries settled near 4.97%. I’d note that the yield of 30-year Treasuries moved above the important 5.30% level, so Bessent’s buybacks have so far failed to push yields lower.
The nearest resistance level for USD/JPY is located in the 158.00 – 158.50 range. A successful test of this level will open the way to the test of the next resistance at 160.00 – 160.50. The key question is whether BoJ is ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.
Dollar Index Outlook: Fed Hike Bets Support Dollar as EUR and GBP Face Diverging Policy Paths The Federal Reserve’s hawkish stance on inflation has strengthened the U.S. dollar on Monday as investors expect the central bank to increase interest rates beyond the recent increase. The CME Group’s FedWatch tool shows that the chances of a 0.25% hike in the target range for the federal funds rate in October has increased to around 56%, from 43.5% last Wednesday.
On Monday, St. Louis Fed President Alberto Musalem said that he expects that inflation will remain above the central bank’s target for a prolonged period of time, and that further increases to the policy rate will be appropriate. According to the latest projections from the Fed, the policy rate will be increased in December.
In the short term, the declining price of oil could mitigate the effects of a stronger U.S. dollar. Declining Treasury yields have eased investors’ concerns about energy supply. However, the U.S. dollar has appreciated against a group of peer currencies over the last few weeks, and it is expected that U.S. yields will continue to increase.
The euro has fewer near-term catalysts. The European Central Bank raised rates in July. However, some officials recently said not to read too much into energy price increases and that they don’t necessarily call for larger rate increases. Falling energy prices should ease inflation, which supports the case for no further rate increases.
There is more support for the British pound. The Bank of England kept rates at 3.75% last week, but said it could increase rates if the disruption in the energy supply from the Middle East continues. Three months’ worth of inflation swaps, which reflect market expectations for future interest rates, show a 65% probability of a rate increase in November and indicate that the bank could increase rates by an additional 1.25 percentage points by the end of 2027. Other recent economic data supported the case for higher interest rates. August’s retail sales grew and July’s GDP growth was greater than expected.
Fundamental bias: I am neutral to slightly bullish on the British pound and euro against the dollar.
U.S. Dollar Index Technical Analysis: DXY Holds 100.33 Support as 100.53 Breakout Comes Back Into Focus
Dollar Index Price Chart – Source: Tradingview The U.S. Dollar Index is currently trading at 100.45. I’m interested in the short-term trend. Note that the index is trading above a rising trendline and recent support at 100.33. A quick buy of the dip to the rising trendline indicates that 100.33 and the rising trendline continue to delineate supporting levels.
The 100.53 level represents the next major resistance. Should 100.53 be taken out, the next levels of interest would be 100.68 and 100.83. The 100.33 level, rising trendline, and 100.19 would provide support should the current uptrend be surrendered. The 100.04 and 99.89 levels would also provide support.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts From a momentum perspective, the Rising trendline and current support at 100.33 are providing support to the bullish outlook. A move below the 100.19 level would negate this outlook. The bullish outlook would also be negated should a move above 100.53 lead to a breakout to the upside with the next target levels at 100.68 and 100.83.
GBP/USD Technical Analysis: Sterling Holds 1.3365 Support as 1.3405 Remains the Key Recovery Hurdle
GBP/USD Price Chart – Source: Tradingview The GBP/USD pair trades at 1.3372 and is consolidating above the 1.3365 support level on the 2 hour time frame. Currently, the price action is below the 200 and 100 hour moving averages and a descending trend line. However, the pair has recently formed a series of higher lows from 1.3336 and this suggests that bears have lost their momentum to push the pair lower.
If the bulls can break the 1.3405 resistance level, then the trend line and higher levels would come into play. The 1.3365 support level would be the next floor if the bears make a return. The 1.3336 and 1.3307 levels would also see increased interest if the sellers gain control.
The relative strength index (RSI) is in the center suggesting that no clear trend is present. With the 1.3405 level as a resistance and the trend line as a lower boundary, a bearish bias is warranted. A bullish bias would be realized if the 1.3436 level is cleared to the upside. The 1.3336 level would also come into play on the downside if support is broken.
EUR/USD Technical Analysis: Euro Slips Back Toward 1.1457 as Descending Trendline Keeps Pressure Intact
EUR/USD Price Chart – Source: Tradingview EUR/USD is currently trading at 1.1461. It is hovering around the 1.1478 resistance level which has capped its upside moves and above which further upside is expected to be seen.
Nonetheless, EUR/USD is below both the 20 and the 100 hour moving averages and a descending trendline which continues to give a bearish bias. The upward move from the lows is also capped by the 1.1492-1.1502 resistance level.
The near term 1.1457 level is the first support below which the 1.1444 and 1.1430 support levels are located. The 1.1478 resistance level is located above which is followed by the 1.1492-1.1502 levels, and then by the 1.1513 resistance level.
RSI is also indicating bearish momentum. Bearish bias will be in effect as long as prices are below the 1.1478 and 1.1492 resistance levels and the descending trendline. A break above 1.1502 is expected to give a bullish outlook.
Softer ECB rate expectations weaken the Euro-Dollar’s support, even as Scotiabank sees signs that bearish momentum is fading. Foreign exchange analysts at Scotiabank see the Euro to US Dollar exchange rate (EUR/USD) settling into consolidation after last week’s sell-off, with the recovery constrained by weaker interest-rate support.
The exchange rate stood near 1.1472 on Monday afternoon, down 0.12% from Friday’s close, after an earlier rise towards 1.1496 faded.
That leaves the Euro close to the lows reached following the Federal Reserve’s quarter-point rate increase, which took its target range to 3.75–4.00%.
Scotiabank notes that expectations for European Central Bank tightening have softened, while the Germany-US two-year yield spread has become less supportive of the Euro.
“Our narrow FV estimate based on 2Y spreads alone has softened somewhat but still remains in the mid/lower-1.15s.”
That estimate sits above the market, but it measures the exchange rate’s relationship with bond yields rather than setting a dated recovery target.
Image: EUR to USD rate's intraday chart Support holds as bearish momentum moderates The bank retains a bearish/neutral technical assessment, with “momentum showing a modest recovery from near-oversold levels”.
“The recent price action leans toward consolidation with clear support observed in the mid/upper-1.14s and limited near-term resistance ahead of the mid-1.15s.”
Monday’s 1.1468 low remains within that broad support area, although the retreat from the session high shows buyers have struggled to sustain gains.
Consolidation still leaves room for ING’s previously flagged downside risk towards 1.1400 if support gives way.
Scotiabank identifies Wednesday’s preliminary purchasing managers’ surveys and Thursday’s German Ifo business sentiment figures as the main European releases this week.
We think stronger activity readings would offer the clearest route to rebuilding confidence in the Euro, particularly if they also revive ECB rate expectations.
Disappointing figures would leave the yield argument weaker and put the mid-to-upper 1.14 support area under pressure.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Key Points:EUR/USD found itself under pressure at the start of the week. USD/CAD tested new highs as precious metals markets pulled back. USD/JPY gained ground as traders ignored the pullback in Treasury yields.
U.S. Dollar Moves Higher As Traders Stay Bullish
DXY 210926 4h Chart U.S. Dollar Index gains ground as traders react to Chicago Fed National Activity Index report. The report indicated that Chicago Fed National Activity declined from 0.08 in July to -0.04 in August, compared to analyst forecast of +0.2.
U.S. Dollar index is moving towards the resistance level at 100.50 – 100.65. In case U.S. Dollar Index manages to settle above the 100.65 level, it will head towards the next resistance, which is located in the 101.50 – 101.65 range. RSI is in the moderate territory, so there is enough room to gain momentum in case the right catalysts emerge.
EUR/USD Retreats As Traders Ignore The Pullback In The Oil Markets
EUR/USD 210926 4h Chart EUR/USD is losing ground despite the pullback in the oil markets. WTI oil declined below the $95.00 level, while Brent oil settled below the psychologically important $100.00 level.
If EUR/USD settles below the 1.1450 level, it will head towards the nearest support, which is located in the 1.1420 – 1.1435 range. A move below the 1.1420 level will open the way to the test of the 1.1400 level.
On the upside, EUR/USD needs to settle back above the resistance at 1.1500 – 1.1515. If EUR/USD climbs above the 1.1515 level, it will head towards the 50 MA at 1.1545.
GBP/USD Pulls Back As Traders Bet On Hawkish Fed
GBP/USD 210926 4h Chart GBP/USD is losing some ground as traders focus on general strength of the American currency. There are no important economic reports scheduled to be released today in the UK, so traders will stay focused on general market sentiment.
A move below the 1.3350 level will open the way to the test of the support level at 1.3285 – 1.3300. On the upside, a successful test of the resistance at 1.3400 – 1.3415 will push GBP/USD towards the 50 MA at 1.3457.
USD/CAD Attempts To Settle Above 1.4330
USD/CAD 210926 4h Chart USD/CAD tests new highs as traders focus on the pullback in precious metals markets. Other commodity-related currencies are mostly flat in today’s trading session.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts From the technical point of view, USD/CAD settled above the resistance level at 1.3985 – 1.4000 and is trying to settle above the 1.4030 level. If USD/CAD climbs above 1.4030, it will move towards the resistance level at 1.4065 – 1.4080. RSI has recently moved into overbought territory, but there is enough room to gain momentum in the near term.
USD/JPY Gains Ground As Rebound Continues
USD/JPY 210926 4h Chart USD/JPY is moving higher as traders ignore the pullback in Treasury yields. The yield of 2-year Treasuries declined towards the 4.74% level, while the yield of 10-year Treasuries settled near 4.96%.
Traders stay focused on the hawkish outlook for Fed policy. FedWatch Tool indicates that there is a 53.1% chance that Fed will raise rates at the next meeting in October.
If USD/JPY settles above the 157.50 level, it will move towards the nearest resistance level at 158.00 – 158.50. A successful test of this level will open the way to the test of the next resistance at 160.00 – 160.50. It remains to be seen whether BoJ is ready to intervene below the 160.00 level.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.
1.1450 emerges as the new line in the sand for the EUR/USD as traders balance out a hawkish Fed and ECB tightening expectations. Current Setup Bias: CAUTIOUSLY BEARISH below 1.1535.
EUR/USD is trading around 1.1480 after a near 1% fall in the week ended 18 September. This weakness was directly attributable to the Federal Reserve’s 16 September rate hike and hawkish dot plot. However, the pair has largely held the key 1.1450–1.1460 support zone, which was a prior unblemished resistance for most of July until it was uncapped on 31 July 2026.
Despite the cautiously bearish bias, the pair is starting to show signs of stabilization post-FOMC. However, traders must not lose sight of the fact that the Fed still holds a stronger policy-rate advantage, while the ECB began tightening earlier this year but has since paused; this provides a floor under the euro. Traders now have to contend with a range that potentially starts at 1.1450 and extends to 1.1600, leaving room for choppy price action and impulse waves with pullbacks rather than a sharp, unidirectional trend push.
Current EUR/USD Macro Drivers 1. USD’s Principal Advantage
The Fed’s 25 bps rate hike took the Fed Funds rate to 3.75%–4.00%. The dot plot of 4.1% suggests an additional hike before year-end. Fed officials have also re-emphasized that US inflation remains too high and expressed commitment to get it down to the 2% target. These events kept US Treasury yields and the dollar supported, and also maintained the substantial differential between policy rates in the US and the Eurozone. The Fed rate hike takes the interest-rate differential between the Fed Funds Rate and the ECB’s Deposit Facility Rate from the top end to 150 bps. Furthermore, Goldman Sachs has appeared among several analysts who are predicting an October rate hike.
2. The ECB’s Tightening Limits the Euro’s Downside
The ECB had raised rates by 25 bps on September 10, taking the deposit facility rate from 2.25% to 2.50%. This was primarily to curb inflation driven by rising energy prices in a predominantly energy-import-dependent euro zone. ECB Vice President Boris Vujcic has advocated caution about automatically translating higher energy prices into further rate hikes, citing the weakening impact of prolonged high energy costs on growth and domestic consumption.
3. Oil is creating a two-sided EUR/USD problem
Brent crude remains above $100, but continues to fall sharply as Saudi oil exports and pipeline flows recover. Reuters reported Brent crude trading around $102.08 early Monday. This supports the Euro, but the geopolitical risk premium remains. Higher oil prices raise European inflation while weakening household purchasing power and Eurozone growth.
EUR/USD Forecast Scenarios This Week Base case→ Consolidation: EUR/USD has to hold 1.1450 support and trade broadly between 1.1450–1.1600 as markets balance the hawkish Fed with any new ECB tightening expectations.
Bull case→Euro recovery: This will depend on a sustained move above 1.1535. This exposes upside targets at 1.1600–1.1650. If US bond yields decline amid new ECB tightening expectations, this supports the bull case scenario.
Bear case→ Dollar upside: If the 1.1450 support gives way, this would expose 1.1400, followed by 1.1350. Rising US Treasury yields, especially a 10-year note above 5.00%, boost this expectation. Markets are also pricing in another rate hike as early as October 2026, even as Brent stays above $100.
Price Catalysts This Week 1. Fedspeak: Further Fed communication is expected as FOMC policymakers Goolsbee, Barkin, Williams and Jefferson hit the newswires on 21-22 September. Any comments indicating that another 2026 hike is cemented would support USD.
2. ECB rhetoric: Will ECB policymakers endorse or push back against additional hiking expectations? Watch out for comments from ECB Chair Lagarde and German Bundesbank President Nagel, among others.
3. Oil Prices and European yields: Another push in Brent crude above current levels ($102) could send European yields soaring and raise ECB tightening expectations. This also increases concerns about a Eurozone recession.
Technical Outlook Key price levels to watch:
Resistance: 1.1535 Major resistance: 1.1600–1.1620 Next resistance: 1.1650 Support: 1.1450–1.1460 Major support: 1.1360-1.1380 The 1.1450–1.1460 area remains the critical pivot. A break below this zone unlocks a move towards the 1.1450–1.1460 price zone.
However, a move above 1.1535 strengthens the recovery bias, with 1.1600- 1.1650 as the resistance zone and the primary target for the recovery move.
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A near-1% weekly fall leaves the Euro exposed to further Dollar gains, although both banks see ECB tightening limiting the decline. The Euro to US Dollar exchange rate (EUR/USD) finished Friday near 1.1486, almost 1% lower over the week, with ING warning of a possible test of 1.1400.
Latest — Exchange Rates:
Euro to Dollar (EUR/USD): 1.148572 (+0.09%)
Pound to Dollar (GBP/USD): 1.339468 (+0.29%)
Dollar to Yen (USD/JPY): 156.88243 (+0.46%)
Crédit Agricole's December forecast is lower at 1.13, extending to March 2027 before a gradual recovery later that year.
Wednesday's Fed-driven fall below 1.15 accounted for much of the weekly decline.
The Federal Reserve raised rates by 25 basis points to 3.75%-4.00%, while its 4.1% median projection for end-2026 implies another quarter-point increase.
Image: EUR to USD performance chart over last week ECB tightening could slow the Euro's decline ING sees scope for higher short-term US yields to support the Dollar, particularly if incoming data and energy prices encourage markets to price an October hike.
However, it also highlights hawkish ECB commentary as a reason for caution:
"This is one reason not to chase EUR/USD lower too aggressively from current levels."
Its 1.1400 view is a near-term downside risk, with Friday's assessment also allowing for stabilisation.
Crédit Agricole shares that qualified bearish stance:
"We are moderately bearish on EUR/USD from current levels because we expect additional ECB tightening to limit the downside risks to a degree in the coming months."
The bank argues that expensive energy, weaker international competitiveness and renewed sovereign credit concerns weigh on European assets, even with the economy proving resilient.
It forecasts 1.14 in June 2027, 1.16 in September and 1.17 in December, following its December 2026 and March 2027 forecasts of 1.13.
The immediate test is whether cheaper oil can loosen the Dollar's grip before those longer-term recovery forecasts come into view.
ING noted on Friday that cheaper oil had slowed the Dollar's post-Fed advance, but doubted that prospective talks between President Trump and Gulf leaders would deliver sufficient relief:
"Even so, we do not see these developments as enough to take Brent back below $100/bbl at this stage."
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
A near-1% weekly fall leaves the Euro exposed to further Dollar gains, although both banks see ECB tightening limiting the decline. The Euro to US Dollar exchange rate (EUR/USD) finished Friday near 1.1486, almost 1% lower over the week, with ING warning of a possible test of 1.1400.
Latest — Exchange Rates:
Euro to Dollar (EUR/USD): 1.148572 (+0.09%)
Pound to Dollar (GBP/USD): 1.339468 (+0.29%)
Dollar to Yen (USD/JPY): 156.88243 (+0.46%)
Crédit Agricole's December forecast is lower at 1.13, extending to March 2027 before a gradual recovery later that year.
Wednesday's Fed-driven fall below 1.15 accounted for much of the weekly decline.
The Federal Reserve raised rates by 25 basis points to 3.75%-4.00%, while its 4.1% median projection for end-2026 implies another quarter-point increase.
Image: EUR to USD performance chart over last week ECB tightening could slow the Euro's decline ING sees scope for higher short-term US yields to support the Dollar, particularly if incoming data and energy prices encourage markets to price an October hike.
However, it also highlights hawkish ECB commentary as a reason for caution:
"This is one reason not to chase EUR/USD lower too aggressively from current levels."
Its 1.1400 view is a near-term downside risk, with Friday's assessment also allowing for stabilisation.
Crédit Agricole shares that qualified bearish stance:
"We are moderately bearish on EUR/USD from current levels because we expect additional ECB tightening to limit the downside risks to a degree in the coming months."
The bank argues that expensive energy, weaker international competitiveness and renewed sovereign credit concerns weigh on European assets, even with the economy proving resilient.
It forecasts 1.14 in June 2027, 1.16 in September and 1.17 in December, following its December 2026 and March 2027 forecasts of 1.13.
The immediate test is whether cheaper oil can loosen the Dollar's grip before those longer-term recovery forecasts come into view.
ING noted on Friday that cheaper oil had slowed the Dollar's post-Fed advance, but doubted that prospective talks between President Trump and Gulf leaders would deliver sufficient relief:
"Even so, we do not see these developments as enough to take Brent back below $100/bbl at this stage."
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
USD Talking Points:
While the Dollar sold off amidst a seemingly bullish backdrop in the prior week, it made up for it this week with a strong breakout after the Fed and BoJ rate hike announcements.
USD/JPY remains the driver for global FX markets and it was the response to the BoJ rate hike that really made the week, including a stronger pullback in EUR/USD as the major pair sank below the psychological 1.1500 level.
It remains a USD/JPY world in the FX market as the crowded carry trade didn’t get that shock of concern that Scott Bessent had hinted at a couple of weeks ago. While the BoJ did hike rates, they didn’t catch anyone by surprise. And Kazuo Ueda refrained from any explicit timelines for future hikes which contrasts with a Fed that did forecast another hike by year-end, and on net, the USD/JPY pair put in a strong showing around FOMC and BoJ rate hike announcements. This helped to drive the USD up to a fresh seven-week high.
From the weekly chart, the USD remains in the same range that’s been in-place for more than a year now, with this week showing DXY pushing above the 100-level for the first time since the sell-off back in July.
That sell-off, of course, was driven by the dual intervention in the Japanese Yen, with both Japan and the U.S. jumping in to push the pair lower. That’s the big question for next week, whether we see another exogenous push of pressure in the crowded carry trade that still has yet to unwind.
US Dollar Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY
This is still the center of the FX market, as far as I’m concerned, and the reaction to the BoJ meeting highlights that markets were looking for something more from Kazuo Ueda. But, in the US session so far we’ve seen that rally pare back, which highlights perhaps the bigger theme, which is holding this near or close to that 160.00 handle can be a daunting proposition.
From the longer-term, there’s a five-year trendline that’s so far helped to set support, and I think this remains notable until it gets taken out.
USD/JPY Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY Shorter-Term
This is still a tough one to get too comfortable with on the long side given that recent history of intervention, but after a pullback, such as we’ve seen over the past two weeks, bulls have taken control and the rally had run by more than 500 pips at one point. As we go into the weekend some profit taking has taken over as price has pulled back from resistance at prior support – but this doesn’t yet appear to be a situation where longs have been shocked out of holding positions in the pair.
USD/JPY Four-Hour Chart
Chart prepared by James Stanley; data derived from Tradingview
EUR/USD
At this point, despite the Euro being a much larger portion of the DXY basket than the Japanese Yen (57.6% v/s 13.6%), it very much feels like EUR/USD is just along for the ride. As a case in point, EUR/USD dropped dramatically over the past week. The weekly chart over the past year displays a choppy, mean-reverting state, and that’s what’s of interest for next week.
EUR/USD Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
EUR/USD
With price stretching below the 1.1500 handle, the question for next week is one of mean-reversion and whether bulls can force a rally back-above the big figure. There’s a prior swing level at 1.1578 that stands out as the next significant spot above the psychological level.
EUR/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Market Analyst, Global Macro
U.S. Dollar Tests New Highs As Treasury Yields Rise
DXY 180926 4h Chart U.S. Dollar Index gains ground as traders focus on rising Treasury yields. The yield of 2-year Treasuries settled above the 4.73% level, while the yield of 10-year Treasuries tested the psychologically important 5.00% level.
The nearest resistance level for U.S. Dollar Index is located in the 100.50 – 100.65 range. If U.S. Dollar Index manages to settle above the 100.65 level, it will head towards the next resistance, which is located in the 101.50 – 101.65 range.
EUR/USD Pulls Back Ahead Of The Weekend
EUR/USD 180926 4h Chart EUR/USD is losing some ground as traders stay focused on the recent Fed decision and Warsh’s comments. FedWatch Tool indicates that there is a 57.6% probability that Fed will raise rates at the next meeting in October.
In the EU, traders focused on Germany’s PPI report. The report showed that PPI increased by +4.6% year-over-year in August, compared to analyst forecast of +4.1%.
In case EUR/USD settles below the 1.1450 level, it will head towards the nearest support at 1.1420 – 1.1435. On the upside, a successful test of the resistance at 1.1500 – 1.1515 will open the way to the test of the 50 MA at 1.1560.
GBP/USD Gains Ground As UK Retail Sales Exceed Analyst Estimates
GBP/USD 180926 4h Chart GBP/USD rebounds as traders react to UK Retail Sales report. The report showed that Retail Sales increased by +0.5% month-over-month in August, compared to anlayst forecast of -0.2%.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts If GBP/USD moves above the resistance level at 1.3400 – 1.3415, it will head towards the next resistance at 1.3470 – 1.3485. RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge.
USD/CAD Attempts To Settle Above 1.4000
USD/CAD 180926 4h Chart USD/CAD tests new highs as traders stay bullish despite rising precious metals markets. Other commodity-related currencies are mixed in today’s trading session.
USD/CAD continues its attempts to settle above the 1.4000 level. In case USD/CAD stays above 1.4000, it will move towards the next resistance, which is located in the 1.4065 – 1.4080 range.
USD/JPY Gains Ground As BoJ Raises Rate To 1.25%
USD/JPY 180926 4h Chart USD/JPY gained strong upside momentum as traders focused on BoJ Interest Rate Decision. The Bank of Japan raised the interest rate from 1% to 1.25%, in line with analyst estimates. However, the BoJ did not provide clear guidance on its plans to raise rates in the future to fight inflation, so the yen found itself under pressure.
I’d note that USD/JPY moved away from session highs as Nikkei reported that BoJ conducted a rate check in the forex market.
Today, traders also had a chance to take a look at Japan’s inflation data. Inflation Rate remained unchanged at 1.9% in August, while analysts expected that it would rise to 2.1%. Core Inflation Rate decreased from 1.8% to 1.7%, compared to analyst forecast of 1.8%. Inlation data served as an additional bearish catalyst for the yen.
If USD/JPY moves above the resistance at 158.00 – 158.50, it will head towards the resistance level at 160.00 – 160.50. On the support side, a move below the 156.50 level will open the way to the test of the support at 155.00 – 155.50.
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The EUR/USD found stability and recovered modestly after the Federal Reserve's first rate hike since 2023 The euro also gained against the dollar, helped by the European Central Bank's recent tightening to 2.50% and easing energy pressures from the Middle East Still, the euro's upward trend might hit a snag. This could happen if energy supply shocks from the Middle East escalate, the ECB unexpectedly turns dovish, or U.S. 10-year Treasury yields climb above 5.0%. The Federal Reserve just raised its benchmark interest rate by 25 basis points, setting the range at 3.75-4.00%. This was the first rate hike since 2023.
While markets largely expected this, policymakers’ forward guidance suggested a more aggressive approach than anticipated. Most indicated at least one more rate increase later this year.
The U.S. dollar initially strengthened significantly, pushing EUR/USD below 1.15. By Thursday, though, the pair had stabilized and started to recover, trading modestly higher near 1.148 in Friday’s session.
Even with ongoing geopolitical tensions in the Middle East, this resilience raises questions. So, what’s behind this contrarian rally?
Why EUR/USD Shrugged Off Fed Rate Hike The FOMC unanimously approved the 25-basis-point increase, bringing the target range to 3.75-4.00%. Updated projections showed 16 of 18 policymakers expect at least one more rate hike by year-end.
A drop in oil prices pulled U.S. Treasury yields down from recent highs. The dollar then gave up some gains it made after the Fed’s announcement, suggesting investors shifted their focus from the immediate rate decision to underlying yield dynamics.
The European Central Bank (ECB) had also hiked its rate a few days earlier, raising its deposit facility rate to 2.50%. Even with a yield difference between the U.S. and the Eurozone, the market seems to be paying more attention to signs of Europe’s economic strength.
Eurozone wage growth has stabilized, and recent economic data hasn’t shown the sharp deterioration some had feared.
The Opportunity In A More Balanced Rate Story For investors and businesses with euro exposure, the current situation offers a more balanced outlook than a one-sided opportunity.
The dollar couldn’t hold its post-Fed gains. This suggests markets aren’t fully convinced the U.S. monetary tightening cycle has really shifted the broader economic landscape. The CME FedWatch Tool supports this, showing about a 50% chance of another rate hike in October.
Traders watching how monetary policies diverge could find openings if markets start doubting the Fed’s future tightening pace, especially if upcoming U.S. economic data is mixed.
A continued narrowing of the interest rate differential or a sustained improvement in European economic confidence could support further gains for the euro.
Watch Out For Risks Several risks could reverse the current stabilization. A significant increase in oil prices due to escalating tensions in the Middle East could put pressure on the euro, given Europe’s reliance on energy imports.
Stronger-than-expected U.S. economic data or more assertive commentary from Fed officials might lead to higher Treasury yields and renewed dollar strength.
Conversely, any indication that the ECB intends to pause its rate hikes would widen the policy divergence in favor of the dollar.
Also, if global markets become more risk-averse, boosting demand for the dollar as a safe haven, the EUR/USD exchange rate would likely fall.
Why did EUR/USD recover after the Fed’s rate hike?
On Thursday, U.S. Treasury yields and oil prices pulled back. This eased some pressure on the dollar, allowing the euro to regain ground it lost right after the Fed’s announcement.
How has the ECB’s recent policy influenced the pair?
The ECB raised rates to 2.50% in September. Their ongoing worry about inflation risks has also kept the euro from weakening further against the dollar.
What role does Middle East geopolitics play in EUR/USD?
Normally, higher oil prices from the conflict pressure the euro, especially since Europe imports so much energy. Lately though, signs of easing supply have reduced that impact.
EUR/USD trades near 1.1470 after the Federal Reserve's first interest rate hike in more than three years strengthened the US Dollar. The Fed raised rates by 25 basis points to 3.75%-4.00% and signalled that further tightening may be needed as inflation remains elevated. The EUR/USD forecast remains under pressure below 1.1500, although easing oil prices and an increasingly aggressive US rate outlook could limit further Dollar gains. EUR/USD is trading near 1.1470 on Thursday after the Federal Reserve delivered its first interest rate hike since 2023 and signalled that US borrowing costs could rise further in the coming months.
The euro has fallen sharply from levels above 1.16 earlier this month as the Dollar benefits from a rapid repricing of US interest rate expectations. The Fed’s decision pushed the Dollar to a seven-week high before some of those gains eased during Thursday’s session.
For EUR/USD, the September Fed meeting has reinforced a widening monetary-policy divide. Markets are now considering additional US rate hikes at the same time as the European economic outlook remains vulnerable to high energy prices and weaker growth.
Hawkish Fed Rate Hike Strengthens the US Dollar The Federal Reserve unanimously raised the federal funds rate by 25 basis points to 3.75%-4.00%, ending a period of more than three years without an increase. The rate hike itself was largely expected. The bigger catalyst for the EUR/USD exchange rate came from the Fed’s updated projections and the message that followed.
Most policymakers see a case for at least one additional increase before the end of 2026. Markets have gone further, pricing a more aggressive tightening cycle than the Fed’s own projections currently imply.
Goldman Sachs has already changed its call following the meeting and now expects another Fed rate hike in October. Markets currently assign roughly a 50% probability to another quarter-point increase at that meeting. The shift has supported US Treasury yields and strengthened the Dollar against major currencies, leaving EUR/USD close to its weakest level in seven weeks.
Fed Outlook Keeps Pressure on EUR/USD The Fed’s economic projections gave investors little reason to expect a quick reversal in monetary policy. Policymakers upgraded their view of US economic growth while projecting lower unemployment and persistent inflation. That combination strengthens the argument that the US economy may be able to withstand higher borrowing costs for longer.
Fed Chair Kevin Warsh also resisted giving explicit forward guidance, leaving incoming inflation and labour-market data to determine how quickly policymakers move from here. That uncertainty matters for the EUR/USD forecast.
If US inflation remains sticky and economic growth holds up, expectations for additional rate hikes could continue supporting the Dollar. Conversely, weaker data would challenge the increasingly aggressive path already priced into US rates.
That distinction is important because the market is currently more hawkish than the Fed itself. If incoming data fail to justify those expectations, some of the recent Dollar strength could unwind.
EUR/USD Forecast: Can the Euro Recover Above 1.1500? The EUR/USD forecast remains tilted to the downside following the Fed decision, with the pair trading near 1.1471 after breaking sharply lower this week. The immediate question is whether EUR/USD can recover above 1.1500. A sustained return above that level would ease some of the recent selling pressure and put the 1.1550 area back in focus.
Failure to reclaim 1.1500 would leave the euro vulnerable to another move lower, with 1.1450 providing the first area to watch. Below that, the 1.1400 region becomes increasingly important. Momentum has weakened significantly during September, reflecting the Dollar’s renewed strength following the shift in Fed expectations.
For now, EUR/USD remains driven primarily by the gap between US and European rate expectations. The Fed has strengthened the Dollar side of that equation, but with markets already pricing an aggressive US tightening path, upcoming inflation and labour-market data will determine whether the greenback can extend its advance.
Why did the US Dollar rise after the Fed rate hike?
The US Dollar strengthened because the Federal Reserve delivered more than the widely expected 25-basis-point hike. Policymakers also signalled that interest rates could remain higher for longer, with 16 of 18 officials projecting at least one additional increase in 2026. That pushed US rate expectations and Treasury yields higher, increasing support for the Dollar.
What does the Fed rate hike mean for EUR/USD?
The Fed rate hike is bearish for EUR/USD when it widens the expected interest-rate advantage of the US over the eurozone. Further increases in US Treasury yields could keep EUR/USD under pressure below 1.1500. However, because markets have already priced substantial additional Fed tightening, weaker US economic or inflation data could reduce those expectations and allow the euro to recover.
Will the Federal Reserve raise interest rates again in 2026?
Another Fed rate hike remains possible before the end of 2026. Twelve FOMC participants projected one additional 25-basis-point increase this year, while four projected another 50 basis points of tightening. Markets will now focus on upcoming US inflation and labour-market data to determine whether the next move comes in October or December.
The euro is expected to face some headwinds in the short term. Recently released data showed that labor costs in the eurozone rose by 3.1% in the second quarter, from 3.3% in the first quarter. However, the ECB’s wage index also showed that average wage increases were expected to be less than 2%.
With high energy prices and inflation, there is an upside risk for inflation, which argues for an aggressive rate hiking policy by the ECB.
Sterling is also set to take center stage on Thursday, with the Bank of England (BoE) expected to keep interest rates on hold at 3.75%, but likely providing hints on where rates could be headed in November. While UK inflation increased to 3.1% in August from 2.2% in July, core inflation remained unchanged at 2.6%. The recent increase in energy prices has not resulted in broader increases in other prices.
Markets have an 80% probability of a November rate hike by the BoE. However, most economists believe there is not enough justification to increase rates at this time. The recent deterioration in the UK labor market, in addition to increasing interest rates, argues against further rate increases.
The direction of the U.S. Fed is likely to set the tone for G10 currencies for the rest of the week. I see the DXY continuing higher, the GBP lower, with the EUR likely mixed. The BoE and the Federal Reserve are likely to further extend their policy divergence.
U.S. Dollar Index Technical Analysis: DXY Holds 100.08 Support as 100.37 Breakout Comes Into Focus
EUR/USD is trading around 1.1459 on Thursday, close to a seven-week low. The US dollar remains supported by the Federal Reserve’s first interest rate increase in three years and signals that further monetary tightening could follow later this year.
The FOMC unanimously raised the federal funds target range by 25 basis points to 3.75–4.00%, in line with market expectations. Fed Chair Kevin Warsh noted that inflation remains too high. Data released last week also showed that core inflation accelerated more sharply than expected in August.
Meanwhile, Donald Trump has once again called on social media for interest rates to be cut rapidly to 1% or lower, although he did not directly criticise Warsh. Against this backdrop, markets continue to focus primarily on the Federal Reserve’s own guidance and the likelihood of further rate increases.
The Bank of England is due to announce its interest rate decision today, with rates expected to remain unchanged. Meanwhile, markets expect the Bank of Japan to raise rates on Friday.
Geopolitical pressure has eased somewhat as oil prices have fallen on hopes that Saudi Arabia can restore supplies through the East-West pipeline. This has provided some relief from inflation concerns, although it has not materially changed the broader hawkish outlook for monetary policy.
EUR/USD technical analysis
On the H4 EUR/USD chart, the market has completed a downward move towards 1.1453. A corrective rebound towards 1.1494 cannot be ruled out in the short term.
Once this correction is complete, the main scenario envisages another decline towards 1.1417.
The MACD indicator supports a short-term correction. Its signal line remains below zero and is near its recent lows, suggesting that the current downward momentum may be approaching a temporary pause.
On the H1 EUR/USD chart, the market has completed another move lower towards 1.1453. A consolidation range is currently forming above this level.
Today, a move higher towards 1.1494 is expected as part of the correction.
The Stochastic oscillator supports this scenario. Its signal line is above 20 and is pointing firmly upwards towards 80, indicating potential for further short-term recovery.
EUR/USD outlook EUR/USD remains under broader pressure as the Federal Reserve’s rate increase and the prospect of further monetary tightening continue to support the US dollar.
From a technical perspective, the pair could first stage a corrective rebound towards 1.1494. Once this move is complete, the main bearish scenario points to a renewed decline towards 1.1417.
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Analysts at ING forecast a EUR/USD recovery to 1.160 by December, but RBC expects two more Fed hikes after Wednesday's quarter-point increase. The Euro to US Dollar exchange rate (EUR/USD) fell below 1.15 after the Federal Reserve raised interest rates, trading near 1.1462 late Wednesday, down 0.65% on the day.
Latest — Exchange Rates:
Euro to Dollar (EUR/USD): 1.1462 (-0.65%)
Pound to Dollar (GBP/USD): 1.33817 (-0.67%)
Dollar to Yen (USD/JPY): 156.22388 (+0.61%)
The Fed's unanimous quarter-point increase took its target range to 3.75%-4.00%.
Its median projections imply another hike this year, followed by unchanged rates through 2027.
ING and RBC split over further tightening RBC expects two additional hikes in 2026, fully reversing last year's insurance cuts.
It points to the Fed's higher growth and inflation projections and lower unemployment forecasts as evidence of policymakers' concern about persistent price pressures.
Image: EUR/USD intraday chart shing reaction to fed hike However, RBC questions how much tighter borrowing conditions can achieve:
"We acknowledge that three rate hikes are unlikely to meaningfully move the dial on what is primarily supply-driven inflation."
The bank warns that higher rates could further squeeze lower- and middle-income consumers already struggling with energy bills and debt.
ING's economists expect weaker hiring, subdued wage growth and eventually cheaper energy to make this a one-off hike.
Its currency strategists nevertheless see little reason to oppose the Dollar's immediate advance:
"As long as energy prices remain firm, we see little reason to fade the current USD appreciation trend."
ING sees scope for further losses towards support at 1.1330-1.1360, where the June decline found a floor, but its central forecast still anticipates a recovery.
"We target 1.150 for end-September and a modest bump to 1.160 by year-end."
The pair has already fallen below the 1.150 target ING highlighted before the decision.
ING's 1.160 year-end call depends heavily on improving Gulf energy flows and a rapid fall in oil prices.
We think RBC's rate outlook would make ING's Euro recovery harder to achieve.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Unanimous Fed hike clears a high bar for hawks
Updated forecasts point to stronger growth, lower unemployment, sticky inflation
Dot plot validates higher-for-longer pricing across the curve
Front-end yields surge, driving sharp bear flattening of US curve
EUR/USD breaks to multi-month lows
After telling markets to figure out the appropriate level for the funds rate themselves, Kevin Warsh and the FOMC duly delivered at the September meeting, hiking rates for the first time in more than three years, as expected, while doing enough to validate the extremely hawkish shift in market pricing seen heading into the decision.
That helped support the US dollar, which ripped higher against a number of the majors, including the euro. With the technical picture for EUR/USD deteriorating sharply, we look at the key levels to watch heading into the weekend.
Fed clears a high bar
Coming into the September FOMC meeting, markets had set a high bar for the Fed to match following the significant hawkish shift in rate expectations over the past month after Warsh’s Jackson Hole speech.
To his credit, Warsh not only met those expectations by following through with a rate hike, but managed to bring the entire FOMC with him. That included influential members such as New York Fed President John Williams, who had been delivering notably dovish commentary heading into the meeting, along with Governor Christopher Waller.
The unanimous vote was the first clear sign that the decision was at least as hawkish as markets had expected, and perhaps even more so.
That view was enhanced further by the Fed’s updated economic projections, which upgraded growth this year and next while simultaneously seeing unemployment significantly lower than projected three months earlier in both years.
Importantly, the FOMC also lifted its 2026 core PCE inflation forecast a tenth to 3.4%, and still has it sitting above its 2% target through 2028, even with a far more hawkish rate profile delivered in the accompanying dot plot.
Faster growth, lower unemployment and persistently high inflationary pressures, especially in the near term. That was an entirely hawkish message.
Rates seen staying higher for longer
While Warsh once again declined to provide his own rate forecast, the remaining 18 FOMC participants overwhelmingly saw the need for higher rates moving forward.
Of those 18 participants, only two saw rates remaining at current levels through year-end. Twelve pencilled in one further 25bp hike, while four saw the case for another 50bp of tightening.
The message remained hawkish further out. The median funds rate was also projected to remain above 4% at the end of 2027, while the longer-run dot was nudged up a tenth to 3.2%, reinforcing the message that policy rates may need to remain higher for longer.
Source: LSEG
While the updated median dot plot path was not as aggressive as what markets had priced heading into the meeting for this year and next, it was hawkish enough to validate the broader direction of travel. Markets not only maintained that hawkish pricing but added to it in response, with another three hikes now expected by June next year.
Undoubtedly, the broader message from the dots was hawkish. But once the dust settles, it may be difficult for the Fed to out-hawk what is already priced into the curve unless we see clear evidence of renewed strength in labour market conditions and another acceleration in inflation over the coming months.
That’s not out of the realms of possibility, but it’s also not the base case. That may eventually create downside risk for the US dollar and front-end Treasury yields, something to keep in mind when assessing directional risks for markets that are heavily influenced by those markets.
Warsh sees little sign of restriction
To ram home the point, Warsh delivered an unequivocally hawkish message in the press conference. He said he would be “hard pressed to describe broad financial conditions as restrictive”, a view he said was widely shared by the Committee, before adding that the September hike had “removed a dose of accommodation”.
Read between the lines, that suggests Warsh does not regard current policy as being particularly restrictive even after the hike. It also leaves the impression that his own stance may be more hawkish than the median FOMC member, even if he declined to provide any guidance.
Front end takes the brunt
Source: LSEG
The reaction in US rates was entirely as you would expect, with yields lurching higher across the curve, led by the front end. Two-year yields rose 13.2bp from immediately before the decision, compared with 11.4bp for five-year yields, 7.6bp for tens and just 3.3bp for the 30-year.
The net result was a sharp bear flattening of the Treasury curve, with the 2s–30s differential narrowing from 72.3bp immediately before the decision to 62.5bp afterwards. With the selloff heavily concentrated at the front end, long-dated yields remained beneath the highs seen earlier this month.
Source: LSEG
On the back of the lift in yields across the curve, the US dollar also strengthened rapidly, placing pressure on all G10 FX names, including the euro.
EUR/USD downside pressure builds
Source: TradingView
Heading into the FOMC meeting, EUR/USD was already under pressure, losing support at 1.1577 early in the week before settling into a range between the 50-day moving average underneath and the 100-day moving average overhead.
However, on the back of the hawkish hike, the pair was sent sharply lower, hitting levels not seen since late July while simultaneously slicing beneath support at 1.1480.
That’s now the immediate level to watch overhead and can be used as a reference point when establishing potential setups depending on price action around it. If we were to see a retest of 1.1480 and failure, it may provide an opportunity to establish shorts with a tight stop above the level for protection, seeking lower levels.
Those to watch underneath include former downtrend resistance running from the January highs, found today around 1.1420, followed by a much more pronounced support zone beginning around the 38.2% Fibonacci retracement of the January 2025 to January 2026 low-high move and extending down to the June 24 swing low around 1.1325. A breach of the latter would add to the risk of a far deeper unwind back towards support at 1.1200.
If EUR/USD were to reverse back above 1.1480 and hold there, the option is also available to establish longs with a tight stop beneath the level for protection. The 50-day moving average comes across as the first potential upside target, found today around 1.1535.
However, longs are the least preferred of the available options right now, a message backed up by the oscillators, which continue to suggest increasing downside pressure. RSI (14) continues to trend lower and is sitting just above oversold territory around 33, while MACD has now flipped negative after already staging a bearish crossover in late August.
That favours, in the short term, selling into strength and downside breaks.
Key Points:EUR/USD is moving lower as traders prepare for Fed decision. GBP/USD pulled back as traders reacted to UK inflation data. USD/JPY remained stuck near resistance at 155.00 - 155.50 ahead of Fed decision.
U.S. Dollar Gains Some Ground As Traders Prepare For Fed Decision
DXY 160926 4h Chart U.S. Dollar Index is moving higher as traders wait for Fed Interest Rate Decision, which will be released soon.
FedWatch Tool indicates that there is a 92.7% probability that Fed will raise the federal funds rate by 25 bps.
Today, traders had a chance to take a look at the Retail Sales report for August. The report indicated that Retail Sales increased by +1.2% month-over-month, compared to analyst forecast of +0.8%.
NAHB Housing Market Index declined from 35 in August to 32 in September, compared to analyst consensus of 32. Higher interest rates put pressure on builder sentiment.
The nearest resistance level for U.S. Dollar Index is located in the 99.85 – 100.00 range. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.
EUR/USD Moves Lower As Traders Worry About Hawkish Fed
EUR/USD 160926 4h Chart EUR/USD is losing some ground as traders prepare for Fed decision. In the EU, traders focused on the Euro Area Industrial Production report. The report showed that Euro Area Industrial Production declined by -0.1% month-over-month in July, compared to analyst forecast of -0.2%.
If EUR/USD pulls back below the support level at 1.1500 – 1.1515, it will head towards the next support, which is located in the 1.1420 – 1.1435 range. RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge.
GBP/USD Tests New Lows After UK Inflation Data
GBP/USD 160926 4h Chart GBP/USD tests new lows as traders bet on hawkish Fed and react to inflation data from the UK.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts UK Inflation Rate increased from 2.9% in July to 3.1% in August, in line with analyst consensus. Core Inflation Rate remained unchanged at 2.6%. The report has also met analyst expectations.
GBP/USD declined below the support at 1.3470 – 1.3485 and is trying to settle below the 1.3450 level. In case this attempt is successful, GBP/USD will head towards the next support at 1.3400 – 1.3415.
USD/CAD Tests New Highs As Traders Stay Bullish
USD/CAD 160926 4h Chart USD/CAD is moving higher despite rising precious metals markets. Other commodity-related currencies are mostly flat in today’s trading session.
USD/CAD moved above the resistance at 1.3900 – 1.3915 and is heading towards the 1.3950 level. A move above 1.3950 will open the way to the test of the resistance at 1.3985 – 1.4000.
USD/JPY Is Stuck Below The 155.50 Level
USD/JPY 160926 4h Chart USD/JPY continues its attempts to settle above the resistance level at 155.00 – 155.50 as traders ignore the pullback in Treasury yields. The yield of 2-year Treasuries declined below the 4.62% level, while the yield of 10-year Treasuries settled near 4.96%.
If USD/JPY settles above the 155.50 level, it will head towards the resistance level at 158.00 – 158.50. On the support side, a move below the 50 MA at 154.41 will push USD/JPY towards the support level at 152.50 – 153.00. I’d note that USD/JPY will be extremely sensitive to Fed decision and comments from Fed Chair Warsh. In case Fed is less hawkish than expected, USD/JPY may find itself under material pressure.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.
Scotiabank strategists Shaun Osborne and Eric Theoret note the Euro (EUR) is consolidating in a tight range around the mid-1.15s as markets await the Federal Open Market Committee (FOMC). They note Eurozone Industrial Production data had little impact on sentiment, while implied volatility suggests a modest move is priced. Their technical view points to a pause before renewed EUR/USD losses toward the 1.1450–1.1475 area if support breaks.
Range trade before potential decline"The EUR is holding a tight range ahead of the FOMC. Eurozone July Industrial Production fell 0.1% in the month, slightly better than forecasts of a 0.2% drop. The data had no impact on EUR sentiment."
"Overnight EUR vol has firmed modestly, implying a breakeven move in spot of about 50 pips. That’s a bit below recent peaks suggesting markets may have largely priced in a hawkish Fed outcome."
"EUR/USD short-term technicals: Neutral/bearish—Spot is consolidating in a tight range around the mid-1.15s."
"Short-term price patterns suggest a pause in the EUR’s recent softness, ahead of renewed losses."
"EUR weakness below 1.1515/20 targets a further decline to 1.1450/75. Resistance is 1.1565/75"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Orbex Group Limited is the holding company of Orbex Global Limited, Orbex Limited is an affiliate with Orbex Global Limited. Orbex Global Limited is authorized and regulated by Mauritius Financial Services Commission “FSC” (View License). Orbex.com is owned by Orbex Group Limited and is operated by Orbex Global Limited with registered address: Ground Floor, The Catalyst, Silicon Avenue, 40 Cybercity, 72201 Ebène, Republic of Mauritius
Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Orbex Global does not offer its services to residents of certain jurisdictions such as Mauritius, USA, and North Korea.
GBP/USD unchanged after UK inflation rises and ahead of the Fed rate decision
GBP/USD is unchanged despite U.S. dollar weakness ahead of today's FOMC rate decision and as the market weighs up the latest UK inflation data ahead of tomorrow's BoE rate decision.
UK inflation climbed for a second straight month, rising to 3.1% year on year in August, the highest since March, and up from 2.9% in July. The increase was in line with expectations and driven by higher prices at the pumps amid the ongoing war in Iran and rising airfares.
Service sector inflation, an indicator of domestic pressures, remained unchanged at 3.4%, whilst core inflation was also unchanged at 2.6%.
The pound was little changed following the data, and expectations surrounding BoE rate hikes remain unchanged, with the market seeing four rate hikes across the coming 12 months.
The BoE meets this week and is expected to leave rates unchanged, as a weak labour market has helped to contain price pressures.
However, this stance is becoming increasingly difficult to maintain, particularly as UK drivers face the most expensive petrol costs since 2022. BoE Governor Andrew Bailey also warned that new risks are coming into play, such as rising food prices from challenging domestic weather and the impact of Super El Niño.
Meanwhile, the U.S. dollar is pausing around a two-week high after reaching a two-week high yesterday, as the U.S. Treasury yield pulls back below 5% from a 19-year high.
All eyes are on the Federal Reserve rate decision at 18:00 GMT, where the market is 91% convinced that the Fed will hike rates by 25 basis points. Given that the move is almost fully priced in, the dollar will only marginally benefit from such a move. Instead, the focus will be on whether the dot plot and projections validate expectations of another rate hike this year.
GBP/USD chart analysis
GBP/USD trades in a rising channel dating back to late June. The price ran into resistance at 1.370 and has eased back, dropping below the 50 EMA to test support around the lower band of the rising channel and the 100 EMA at 1.3470. The RSI is below 50.
Sellers will look to take out the 1.3470 support to expose the 200 EMA at 1.3425. A break below here could see sellers gain traction towards 1.3335 and 1.3270, the late July low. A break below here creates a lower low, turning attention back to the 1.3200 support zone.
Should the 1.3470 support hold, buyers will look to rise above 1.3550, the September high, to create a higher high and turn attention back towards 1.3650 and onto 1.3700.
EUR/USD at a monthly low ahead of the FOMC rate decision
The U.S. dollar is unchanged, with all eyes on the Federal Reserve rate decision, where the Fed is expected to hike rates for the first time in over two years.
The meeting comes as oil prices are elevated above $100 a barrel and as the U.S. 10-year Treasury yield pushed above 5% for the first time since 2007 on surging oil prices, persistent inflation concerns and a deteriorating U.S. fiscal backdrop.
Higher yields have helped the U.S. dollar push northwards, trading at a two-week high ahead of the decision.
The Fed is expected to raise interest rates by 25 basis points. However, this is 91% priced in, so the bigger question will be whether policymakers validate expectations for further increases this year.
Given Federal Reserve Chair Kevin Warsh's preference for limited forward guidance, attention will be on the dot plot and updated growth and inflation forecasts for clues over what comes next.
There is a chance the dollar could fall if Chair Kevin Warsh hikes rates but plays down the risk of any follow-up moves in the press conference.
EUR/USD forecast – technical analysis
EUR/USD has broken down below the rising channel, taking out the 200 EMA. This, combined with the RSI below 50, keeps sellers hopeful of further downside.
Support can be seen at the 1.1525 support zone. A break below here opens the door to a deeper sell-off towards 1.1350.
On the upside, any recovery would first need to rise above the 50 EMA as well as the horizontal support at 1.1570. A rise above here turns attention towards the 1.1660 level, the falling trendline resistance and the lower band of the rising channel.
A rise above 1.1700 is needed to create a higher high.
TL;DR: One Fed hike is effectively certain today, but markets are pricing four hikes total at an approximately quarterly cadence—whether the SEP validates that path, or its hawkish tail, will decide whether EUR/USD extends below 1.1471 or reverses back through 1.1653.
Markets Have Moved Beyond Today’s Hike One Fed hike is effectively certain. The other three are where the risk lies. If officials validate the market’s 100bp tightening path—or its hawkish tail—EUR/USD has room to extend below 1.1471. If they undershoot it materially, 1.1653 becomes the level that separates a temporary bounce from a genuine reversal.
Fed funds futures indicate investors are pricing four 25bp hikes in total over the next several quarters, including today’s expected move. The modal terminal range reaches 4.50–4.75% around June 2027 and then holds near that level through the end of the year. That plateau matters because it suggests the market is pricing a completed tightening cycle rather than a policy rate still moving continuously higher.
Probability-weighted OIS pricing produces an expected rate around 4.52–4.55% by mid-2027, broadly consistent with the futures distribution. This is another representation of the same short-rate market rather than an independent confirmation, but the two measures point toward a similar endpoint.
The US two-year Treasury yield around 4.65% provides a separate consistency check. The cash yield reflects the average expected policy rate over its maturity, plus term premium and other adjustments, so it can’t independently identify the terminal rate. Nevertheless, it’s consistent with a policy path that stays elevated as tightening extends into 2027.
The important distinction is therefore that today’s hike is the first move in a four-hike path, not a standalone event.
The Priced Cadence Is Approximately Quarterly The market isn’t expecting four consecutive hikes. OIS probabilities alternate between meetings with relatively high and low tightening risks, concentrating the likelier moves around September, December, and March, with intervening meetings more likely to be skips.
That produces an approximate one-hike-per-quarter cadence. It implies a measured cycle in which the Fed raises rates, assesses the economic response, and then tightens again if inflation and activity continue to justify it.
This distinction matters for EUR/USD. A projection showing further hikes without suggesting consecutive moves could still validate the market’s broader Dollar-supportive path. The Fed doesn’t need to promise an aggressive meeting-by-meeting campaign to endorse the 100bp total.
The Four-Hike Path Isn’t a Hard Ceiling The futures distribution also contains a meaningful hawkish tail. Around 19% probability is assigned to a fifth hike and a 4.75–5.00% range by December 2027. A further approximately 7% is distributed across outcomes above 5.00%.
That gives a combined 19–26% tail risk above the four-hike base case. If the updated projections point toward either a faster cadence or a terminal rate above 4.75%, the Fed would validate a scenario currently treated as possible but not central. Such an outcome would deliver a larger Dollar catalyst than today’s expected decision itself.
The SEP Must Validate Both Timing and Destination The June SEP produced a median year-end 2026 rate of 3.8%, broadly consistent with one hike during the year. Nine of the 18 officials submitting projections expected at least one increase. Three policymakers subsequently dissented in favor of tightening at the July meeting, up from two in June, keeping the risk of a higher median firmly in play.
The September projections now face two separate tests. The 2026 median will show whether officials expect another hike after today, potentially in October or December. The 2027 median will indicate whether the committee is moving toward the market’s broader 4.50–4.75% terminal range.
Federal Reserve Chair Kevin Warsh is expected to withhold his individual projection again, consistent with the position he adopted in June. The number of other participants submitting dots will therefore matter. Any further abstentions would thin the sample and make movement in the median less informative than usual.
Warsh’s press conference will be equally important. The dots may reveal the intended destination, but his guidance will determine whether markets interpret a lower projection as a gradual tightening path or a genuine rejection of additional hikes.
ActionForex’s Technical View on EUR/USD: Breaking Its Daily Moving Average EUR/USD enters the decision with a mild downside bias. This week’s break below the daily 55-day EMA strengthens the case that the rebound from 1.1323 to 1.1710 completed as a three-wave corrective structure rather than the beginning of a new impulsive advance.
Daily MACD has turned lower, while RSI has fallen to around 42, leaving room for further weakness before oversold conditions emerge. On the four-hour chart, price is also below its moving average, with MACD in negative territory and RSI near 38.
The weekly picture is less decisively bearish. Weekly RSI stands near a neutral 48, while MACD remains below zero but above its signal line. The higher timeframe therefore provides no oversold floor, but it hasn’t yet confirmed a larger bearish reversal. The immediate downside case is being driven primarily by the daily and four-hour structures.
The first target is the 61.8% retracement of 1.1323 to 1.1710 at 1.1471. A decisive break would expose the stronger 1.1353–1.1323 support zone, formed by the July low and the long-term 38.2% retracement of the rise from 1.0176 to 1.2081.
Four SEP Outcomes, Four Technical Tests SEP outcome EUR/USD confirmation Market interpretation Exceeds the priced path Break of 1.1471, followed by 1.1353–1.1323 Hawkish tail above four hikes becomes a central risk Validates four-hike pricing Initial test of 1.1471 Downside bias continues, but sell-the-fact volatility is possible Mildly undershoots Recovery stays below 1.1653 Dollar pullback without confirmation of a EUR/USD reversal Deeply undershoots Break of 1.1653, followed by 1.1710 Market reprices the Fed path materially lower These levels should confirm the interpretation rather than be treated as automatic outcomes. Because much of the tightening path is already priced, even an SEP that broadly validates four hikes could produce a limited Dollar reaction or an initial sell-the-fact move.
Similarly, a modestly lower dot plot wouldn’t complete a EUR/USD reversal by itself. A break of 1.1653 is required to indicate the fall from 1.1710 has ended. A subsequent move through 1.1710 would confirm the broader rebound is resuming.
The Dot Plot, Not the Hike, Holds the Answer EUR/USD already reflects competing Fed and ECB tightening expectations. The immediate question is whether the Fed’s updated projections preserve a sufficiently stronger US path to extend the pair’s decline.
A break of 1.1471 would show the SEP had reinforced the current Dollar advantage. A fall through 1.1353–1.1323 would require a more substantial hawkish surprise and would carry larger structural implications. Conversely, a recovery through 1.1653 would indicate the Fed failed to meet what markets had already priced.
Today’s hike was never the central uncertainty. The decision lies in whether the Fed validates the remaining three moves, their approximately quarterly cadence, and the tail risk beyond them.
Key Takeaways Markets price four total 25bp hikes at an approximately quarterly cadence (September, December, March), with a modal terminal range of 4.50-4.75% by mid-2027. A combined 19-26% tail risk sits above the four-hike base case, meaning a faster cadence or a terminal rate above 4.75% would deliver a bigger catalyst than today’s hike itself. The September SEP faces two tests: whether the 2026 median rises above 3.8% (signaling another hike this year) and whether the 2027 median moves toward the market’s 4.50-4.75% terminal range. Warsh is expected to withhold his individual projection again, making the participation count and his press conference guidance as important as the median dot itself. EUR/USD’s first target is 1.1471; a break opens 1.1353-1.1323, while a recovery through 1.1653 and then 1.1710 would instead signal the Fed undershot priced expectations.
ActionForex
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A Fed hike is already heavily priced in, leaving its message on further tightening crucial to ING's near-term Euro forecast. The Euro to US Dollar exchange rate (EUR/USD) slipped to 1.1540 on Tuesday, leaving ING's short-term target of 1.150 around 40 pips away.
Latest — Exchange Rates:
Euro to Dollar (EUR/USD): 1.1541 (-0.06%)
Pound to Dollar (GBP/USD): 1.347191 (-0.22%)
Dollar to Yen (USD/JPY): 155.08324 (+0.44%)
Monday's 0.44% decline accounted for most of the pair's roughly 0.5% fall since Friday's close, as higher US short-term yields, expensive oil and weaker risk appetite supported the Dollar.
ING sees scope for the move to extend if Wednesday's Federal Reserve decision reinforces those pressures.
Its models put EUR/USD near fair value, with a slight bias towards undervaluation, but the bank says equities and short-term interest rates currently exert a particularly strong influence.
ING's Francesco Pesole warns that "a risk-off, hawkish hike by the Fed tomorrow could easily take the pair to our 1.150 short-term target."
Image: EUR to USD rate 48hr chart The Fed's guidance matters beyond September Futures put the chance of a September hike at around 93% early Tuesday, following the stronger monthly US core inflation reading that helped shift expectations last week.
We think further Dollar gains will depend heavily on whether the Fed encourages markets to price additional hikes beyond September.
A cautious message could instead limit the currency's advance, even if policymakers raise rates.
BNP Paribas also expects initial Dollar strength, with a separate year-end EUR/USD forecast of 1.14.
"We expect Fed hikes to temporarily offset structural headwinds and support the dollar. EUR/USD would target 1.14 by end-2026, before the dollar's structural downtrend resumes toward 1.20 by end-2027, although political and fiscal risk may weigh on the euro next year."
For the immediate outlook, ING also identifies improving Gulf news as a potential trigger for a Dollar pullback.
An easing of the oil shock would reduce one source of pressure on the Euro.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Gold Price Forecast: XAU/USD Levels to Watch After the Fed Decision Hawkish Fed Hike: Gold Could Fall Toward $4,250 Because gold pays no yield, higher interest rates increase the opportunity cost of holding it. A confirmed rate hike and hawkish guidance would raise real yields and strengthen the U.S. dollar, making gold more expensive for holders of other currencies, thereby pushing XAUUSD lower. The updated Summary of Economic Projections and Chair Warsh’s press conference will determine the trend. If the dot plot signals further rate increases in December or beyond, gold could fall towards $4,250. However, the ongoing geopolitical tensions in the Persian Gulf and elsewhere will provide buying support on dips and limit the losses.
Dovish Fed Hike: XAU/USD Could Rebound Toward $4,400-$4,450 If the Fed hikes by 25 basis points but delivers a dovish message, gold could experience a ‘buy the fact’ rally. If Warsh frames the hike as a limited adjustment and signals a pause, pressure on gold would ease. Yields could fall, and the dollar could drop, sending XAUUSD towards $4,400–4,450.
Fed Hold Scenario: Gold Could Rally Above $4,500 If the Fed unexpectedly holds rates, gold could rally sharply as the dollar weakens and Treasury yields drop.Holding rates is the least likely decision. Markets will almost certainly interpret it as a response to political pressure, and it will hurt the Fed’s credibility. Inflation expectations will rise, boosting the appeal of gold as a macro hedge and providing structural bullish support. Under this scenario, XAUUSD may ultimately rally above $4,500.
Bitcoin Price Forecast: BTC/USD Scenarios Around the Fed Decision Traditionally, BTCUSD trades in close correlation with technology stocks and other risk-sensitive assets. When the Fed increases interest rates, it effectively reduces liquidity by making cash and short-term bonds more attractive. Additionally, higher rates also strengthen the U.S. dollar, which naturally exerts downward pressure on Bitcoin because the BTCUSD pair is priced in greenbacks. Therefore, a sustained tightening signal from the Fed would create a persistent obstacle for digital assets.
Hawkish Fed Outlook: Bitcoin Could Test $75,000-$76,000 Under the base case scenario, traders should expect the Bitcoin price to decline, especially if the updated dot plot signals further rate increases in December and Chair Warsh delivers a hawkish press conference. Specifically, Bitcoin might test the support zone between $76,000 and $75,000 as bond yields rise and the dollar strengthens. If the Fed suggests that its decision is the start of a prolonged hiking cycle, crypto markets may experience broader selling pressure, and Bitcoin may drop towards $73,300.
Dovish Fed Signal: BTC Could Rebound Toward $79,500-$82,000 Under Scenario 2, in which the Fed delivers a limited rate increase and signals a pause in future hikes, Bitcoin may experience a sharp relief rally. If Chair Warsh describes the hike as a minor adjustment to manage energy-driven inflation, bond yields should fall, easing overall financial conditions. Under this outcome, Bitcoin could rise towards $79,500–82,000. Indeed, weak aggregate demand gives the Fed a good reason to sound cautious. The University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index dropped to 47.8 in September, and diesel prices have hit depressing levels, hurting consumers’ morale. Markets would read the Fed’s caution as dovish and supportive for risk.
Fed Hold Scenario: Bitcoin Could Rally Toward $82,000-$84,000 A decision to keep rates unchanged would trigger a strong rally towards $82,000–84,000. Fed credibility will suffer, and Bitcoin would benefit not only from increased liquidity but also from renewed interest in non-sovereign assets. However, rising long-term inflation expectations might create price uncertainty in Q4 and leave the rally on shaky ground.
EUR/USD Forecast: Fed Guidance and Rate Differentials in Focus Hawkish Fed Guidance: EUR/USD Risks 1.1480 and Below The EURUSD exchange rate depends heavily on the relative gap in policy paths between the Fed and the European Central Bank (ECB). One-month EURUSD forward points are currently near 13.6–13.8 pips, which highlights a clear carry disadvantage for holding euros against dollars. A Fed rate hike would widen this interest rate differential further, supporting the dollar. However, because investors already overwhelmingly anticipate a 25-bps hike, it will be the economic projections and press conference that will determine the pair’s direction. Under the base case scenario, traders should expect EURUSD to drop towards 1.1480 as the rate gap widens. Signal projections of multiple additional hikes in 2026 could push the pair below 1.1450. The size of the move will depend on how hawkish the guidance is. In addition, an expected Bank of Japan rate hike on Friday could cause yen carry trade unwinds, adding further selling pressure on the euro.
Dovish Fed Pause Signal: EUR/USD Could Recover Toward 1.1645 If the Fed signals a pause after one rate increase, U.S. yields would drop, narrowing the rate gap. In this scenario, EURUSD could bounce back towards the 1.1600–1.1645 range.
Fed Hold Scenario: EUR/USD Could Jump Toward 1.1700 If the Fed holds rates, EURUSD could rally sharply, perhaps by as much as 100–150 pips, towards 1.1650–1.1700. A decision to keep rates unchanged would lower short-term yields in the U.S., broadly weaken the greenback, and raise questions about Fed independence and inflation-control credibility. Over the medium term, a hold could still hurt the euro if it lifts U.S. inflation expectations, but the immediate knee-jerk reaction will be very bullish.
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A retreat towards 1.1500 support has turned the EUR/USD forecast more cautious, even as bond yields offer the euro some protection.
The Euro to Dollar (EUR/USD) exchange rate slipped to 1.1552 on Monday, down 0.41%, as risk aversion outweighed support from interest-rate differentials.
Scotiabank's near-term assessment is neutral to bearish after last week's recovery raised hopes of a move towards 1.1700.
"We see major support at 1.15 and see limited near-term resistance ahead of 1.1650."
Its assessment follows a sharp deterioration in the relative strength index, which briefly exceeded 70 in late August.
"The latest decline has dragged momentum into the low 40s, reflecting spot's decline to its 50 day MA at 1.1531."
That moving average was being tested when Scotiabank assessed EUR/USD at 1.1539, before the pair recovered some ground later in the session.
Yields suggest a firmer euro
The bank sees a gap between the exchange rate and the level implied by two-year German and US bond yields.
"Sentiment is dominating as yield spreads remain relatively well supported, offering a narrow FV estimate based solely on yield spreads (2Y Germany-US) at 1.1633."
That fair-value estimate is a model reference, not a dated forecast that EUR/USD will recover to 1.1633.
Scotiabank also notes: "Hawkish comments from the ECB appear to be intensifying in response to the latest rise in energy prices, with Executive Board member Schnabel characterizing the increase as 'quite concerning'."
Germany's outlook comes back into focus with Tuesday's ZEW release:
"Fundamental releases have been limited and we continue to highlight the importance of Tuesday's ZEW investor sentiment survey, a noted leading indicator for industrial production (by about 12-18 months)."
We think a stronger reading would help the euro's recovery case, although Monday's decline shows that supportive yields alone have not overcome demand for the dollar.
Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.
EURUSD fell around 0.5% in early Monday trading, deflated by stronger dollar on growing expectations for Fed rate hike, as well as safe haven buying on the latest warning that pace of AI development must slow to prevent threats to humanity that resulted in strong drop in AI-linked stocks.
The pair hit one month low (1.1534), with fresh acceleration weakening technical structure on daily chart and opening way for further losses.
Break of supports at 1.1563/55 (Fibo 38.2% of 1.1324/1.1711 / 100DMA) generated fresh bearish signal, contributing to last week’s bull-trap (above 200DMA), along with completion of bearish failure swing pattern.
Negative momentum continues to strengthen, and this week’s daily cloud twist would also attract further weakness.
Bears eye immediate target at 1.1517 (Fibo 50% retracement, reinforced by 55DMA), ahead of thinning daily cloud, spanned between 1.1505 and 1.1472 (the latter also marks Fibo 61.8% retracement).
Upticks should be ideally capped by broken supports, now acting as solid resistances at 1.1560 zone, to keep bears intact.
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
