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The single currency alternated gains and losses against the US Dollar (USD) this week, prompting EUR/USD to stabilise around the 1.1200 neighbourhood on Friday, while remaining unable to sustain its earlier bull run toward the 1.1260 zone. On the monthly chart, the second drop in a row appears almost unavoidable.

Furthermore, spot has given away around six big figures since its peak past 1.1700 in the summer, coming under increasing selling pressure since then in tandem with the strong bounce in the Greenback.

On the latter, the US Dollar has traded on the back foot this week, as the ongoing bullish move appears to have taken a breather alongside alternating moods regarding developments from the Middle East crisis. 

Next week could be critical for the pair in light of both the European Central Bank (ECB) and Federal Reserve (Fed) meetings, where both central banks are expected to keep a steady hand this month.

No news is hardly good newsGeopolitical tensions remain stubbornly elevated. The familiar US-Iran standoff over the Strait of Hormuz shows little sign of resolution, while the ongoing Russia-Ukraine conflict adds another layer of uncertainty, keeping risk aversion alive and safe-haven demand supported.

Energy prices put the ECB back on the defensiveThe geopolitical fallout is increasingly visible in energy markets. Crude Oil prices continue to climb, European fuel costs are rising, and gas price forecasts face repeated upward revisions. For the energy-dependent Eurozone, this represents more than another squeeze on household budgets: it threatens to turn an external price shock into a more persistent inflation problem.

That is precisely where the European Central Bank faces its biggest challenge. Policymakers can look through a temporary jump in energy prices, but not if higher costs spread into wages, services and inflation expectations. With growth already vulnerable to expensive energy imports, the ECB risks having to tighten policy into a weakening economy simply to prevent inflation from becoming entrenched. The longer the energy shock persists, the stronger the case for additional tightening becomes. Markets are already pricing in around 18 basis points of further rate hikes by year-end.

Now, about inflation…According to Friday’s ECB survey, Eurozone consumers’ inflation expectations rose slightly over the 12-month horizon in September, while longer-term expectations remained unchanged. The survey points to persistent upside risks for the ECB, although it does not yet suggest a fresh deterioration in medium-term expectations.

Inflation expectations for the next year increased to 3.1% from 3.0% in August. Expectations three years ahead held at 2.9%, while the five-year measure remained unchanged at 2.5%.

The latest survey is mildly hawkish for monetary policy. 

Near-term expectations remain elevated and above the bank’s 2% target, but the stability of the three- and five-year measures suggests that longer-term expectations have not materially de-anchored. The ECB will nevertheless remain alert to the risk that persistent energy and supply pressures may begin to influence broader price-setting behaviour.

Crowded shorts meet a surprising options divergenceEUR bearish positioning intensified in the week ending October 13, according to Commodity Futures Trading Commission (CFTC) data.

That said, non-commercial net shorts increased to around 137.6K contracts, while the weekly change deteriorated to -38,241 contracts from -36,076. The four-week change tumbled to around -110.6K contracts, confirming that bearish speculative positioning continues to deepen.

Also, open interest rose to around 874.6K contracts. The deeper net shorts, combined with a slightly higher participation, suggest a continued bearish positioning, though the modest increase in open interest implies the latest move was not accompanied by a significant expansion in overall market activity.

The speculative exposure plummeted to -15.73% (previously -11.41%), and its percentile dropped to 0 (from 0.7). The Net Position Percentile also remained at 0. Both measures are now at the most bearish levels in the five-year reference period, showing that EUR positioning is historically extreme both in absolute terms and relative to open interest.

However, the options market presents a contrasting picture. The one-month 25-delta Risk Reversal was -0.531 volatility points on October 22, implying that EUR puts are still priced higher than equivalent calls. But the reading is at the 30.7th percentile of its five-year distribution, indicating that the downside skew is quite moderate compared with the extremely bearish positioning in futures markets.

More importantly, option pricing has now become decidedly less bearish compared to EUR/USD spot performance. The pair has dropped 1.45% over the last month, but Risk Reversals were higher by 0.114 volatility points. Historically, a decline of such magnitude would have implied a deterioration of about 0.223 volatility points based on their history.

Instead, the positive deviation of 0.337 volatility points is at the 89.5th percentile of the out-of-sample distribution. This implies that options have repriced the EUR much more positively than spot moves would imply in isolation, creating a large divergence between speculative futures positioning and options sentiment.

That said, the latest weekly Risk Reversal change of -0.082 volatility points suggests that some demand on the downside has returned, meaning the improvement in options sentiment is not yet firmly established across all time horizons.

Overall, the positioning on the EUR remains decisively bearish, but the divergence between futures and options is something to watch. Speculative shorts are exceptionally extended, while options markets are displaying considerably less downside concern than the EUR’s recent weakness would normally suggest. This combination raises the risk of a short-covering rebound if bearish momentum begins to fade, although the continued deterioration in weekly futures positioning means that a sustained reversal remains unconfirmed.

What’s in store for EUR/USD?The coming week may be key for EUR/USD: preliminary inflation figures from Germany and the Euroland will provide fresh clues on whether the recent energy-induced price pressures are beginning to feed through to inflation expectations.

In addition, the ECB is widely anticipated to leave its policy rates unchanged at its meeting on Thursday, while the usual press conference by President Christine Lagarde is expected to highlight persistent energy-driven inflation.

Across the Atlantic, the focus will be on the FOMC gathering on Wednesday, with the Federal Reserve (Fed) also seen leaving its Fed Funds Target Range (FFTR) at 3.75%-4.00%. Data-wise, investors are also expected to keep their focus on inflation measured by the Personal Consumption Expenditure (PCE) and another estimate of the Q3 GDP Growth Rate.

Too bearish to fall, too weak to rally?While the Euro may be near a level where selling is becoming more difficult, that doesn’t necessarily mean the overall bearish trend is losing momentum. The pair stays close to 1.1200 after giving up some six big figures from summer highs. The short-term outlook is fragile, with the Greenback holding a bid amid relatively solid US fundamentals, higher Treasury yields and ongoing geopolitical uncertainty.

Still, positioning suggests the next move may not be entirely smooth. Speculative EUR shorts are at 5-year extremes, and options markets are showing much less conviction in the bearish theme than the recent decline in spot would imply. That divergence makes spot more and more susceptible to a short-covering rally if next week's Fed meeting turns out to be less hawkish than what investors are currently expecting.

However, a recovery driven primarily by position adjustment would hardly qualify as a genuine change in trend. The Eurozone remains particularly exposed to elevated energy prices, and while those pressures could keep the ECB leaning towards further tightening, they also threaten to undermine growth. That uncomfortable combination limits the extent to which a hawkish ECB can provide lasting support for the single currency.

Looking beyond next week's central bank meetings, the balance of risks therefore remains tilted to the downside. A sustained recovery would likely require a meaningful retreat in US yields, a broader improvement in risk appetite and convincing evidence that the Fed's tightening cycle is approaching its end. Without those catalysts, any rebound towards the 1.1260 area could struggle to attract sustained buying interest, leaving the 1.1000 psychological threshold as a plausible medium-term destination.

For now, the Euro may be due for a bounce, but the burden of proof remains firmly on the bulls.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

United Overseas Bank strategists (UOB) Quek Ser Leang and Lee Sue Ann report that EUR/USD outperformed modestly as the US Dollar (USD) softened, but price action remains choppy and largely directionless. In the near term, they expect intraday ranges around 1.1185–1.1250, while over the next 1–3 weeks the Euro (EUR) is seen consolidating in a narrower 1.1170–1.1270 band, with a corrective recovery potentially extending above the 21-day EMA.

Euro seen consolidating in tighter band"24-HOUR VIEW: Following Wednesday’s price action, we highlighted yesterday that “momentum indicators are mostly flat and today,” and we expected EUR “to range-trade between 1.1210 and 1.1250.” EUR subsequently rose to 1.1256, declined to 1.1188 and then rebounded to close at 1.1214 (-0.16%). We are not able to derive much from the price action. Today, EUR could trade between 1.1185 and 1.1250."

"1-3 WEEKS VIEW: We have been expecting EUR to trade in a range since late last week. Yesterday (22 Oct, spot at 1.1230), we stated that “the price movements since then still appear to be part of a range-trading phase, but a narrower 1.1170/1.1270 range is likely sufficient to contain EUR for now.” We continue to hold the same view."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

French bond yields are testing levels last seen in 2002, while momentum approaches overbought conditions last seen in 2022. French political and debt uncertainty are contributing to the move. However, as with German and US Treasury yields, a pullback may be on the horizon, with bearish-divergence signals and three-month overbought momentum risks emerging across the 2022–2026 period.

US 10-year Treasury yields are also showing a bearish momentum divergence after reaching overbought levels last seen in 2022 and 1980. The yield remains below 5.34% but is holding above 5%, supported by persistent US inflation near 3.7% and geopolitical uncertainty.

The Israeli election on October 27 and US midterm elections on November 3 may influence the geopolitical outlook and add to pressure on global economies. Against a backdrop of extreme fear sentiment and stretched bond-yield momentum, a pullback in yields could allow the euro to extend its recovery from the 1.11 support level and daily oversold conditions last seen in 2015.

US 10-Year Treasury Yield Outlook: Three-Month Time Frame – Log Scale

Source: TradingView

The latest pullback in US 10-year Treasury yields comes as the yield tests a historically significant resistance barrier dating back to the 1920s. Bearish-divergence risks have also emerged as momentum retreats from overbought levels last seen in 2022 and 1980. Together, these signals raise the possibility of a longer-term decline in yields, which could help set the stage for a sustained market uptrend.

The yield is currently testing support near 5%, while US inflation remains a concern at 3.7%. A break below this level could support risk appetite. By contrast, a move above 5.34% could support the dollar’s advance toward new 2026 highs and put pressure on markets, potentially exposing charts to fresh 2026 lows.

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French 10-Year Bond Yield Outlook: Three-Month Time Frame – Log Scale

Source: TradingView

Like US bond yields, surging crude oil prices and geopolitical tensions are also contributing to the rise in French yields besides political and debt uncertainty in France, adding pressure to the euro and the broader European outlook. 

French 10-year yields are testing elevated resistance levels above 5%, last seen in 2002. At the same time, bearish-divergence risks are emerging as momentum reaches overbought levels last seen between 2022 and 2026, keeping near term reversal risks in the picture.

German 10-Year Bond Yield Outlook: Three-Month Time Frame – Log Scale

Source: TradingView

The spread between French and German yields is widening, with 10Y German yields near 3.37%, adding further pressure to the European outlook. However, German 10-year yields are also showing a four-year bearish divergence between 2022 and 2026, with three-month momentum retreating from historically overbought levels. This also increases the potential for a near-term correlated pullback, possibly in line with upcoming elections and geopolitical negotiations. If not, the recent highs may turn into supports, allowing yields to climb higher and economic conditions to drop further.

DXY Outlook: Daily Time Frame – Log Scale

Source: TradingView

The DXY retains a neutral-to-bullish outlook after pulling back from 103, an eight-month up trending resistance level that had capped the index since March. The retreat followed overbought conditions last seen in 2023 and is now testing the 2026 uptrend near 101, facing  the psychological 100 level as a key invalidation point. Daily RSI is also retesting the neutral 50 level from above.

A break below 100 would confirm selling pressure beneath the boundaries of the year-long contracting consolidation. This could ease pressure across currency markets, including on the euro.

Expectations of a Fed rate hold at next week’s October meeting, alongside weaker-than-expected labor-market data, are helping underpin the current outlook. However, escalating geopolitical tensions, higher crude oil prices and renewed inflation pressure could support a dollar rebound toward resistance at 102.60 and 103, raising the possibility of a bullish breakout.

EUR/USD Outlook: Weekly Time Frame – Log Scale

Source: TradingView

On the weekly chart, EUR/USD is still struggling to climb back above 1.1260, near the former descending trendline drawn through lower lows since August 2025. A daily or weekly close above 1.1260, followed by a break through the 1.1380–1.1400 zone, would likely reassert the bullish-reversal bias and reinforce the pair’s longer-term neutral-to-bullish outlook within the broadening formation that has been developing since July 2025.

On the downside, the rebound from psychological support at 1.11 aligns with the 78.6% extension of the January–June–August 2026 wave. A break below 1.11 would expose the 100% extension near 1.0950 before another potential dip-buying opportunity given the steep oversold momentum conditions.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

Neither rising oil prices nor the stabilisation of Treasury bond yields nor the rebound in stock indices is helping the US dollar. Investors increasingly view the risks of a repeat of the 2012 European debt crisis and the 2022 energy crisis as exaggerated. If so, the sell-off in EURUSD has gone too far. The bulls now have a chance to stage a comeback.

Rumours that Qatar and Pakistan have put forward a new proposal to resume talks between the US and Iran have led to increased volatility but have had little impact on Brent prices. European gas, however, reacted with a sharp fall. At present, there is no question of an energy crisis, as prices are still far from the 2022 peaks, despite storage facilities in Europe being only 75% full – a record low for this time of year.

Franklin Templeton Fixed Income argues that France, with its €3 trillion economy and €3.6 trillion in debt – ten times Greece’s during its crisis in 2011–2012 – poses a far greater threat to the eurozone than the PIGS did 14 years ago. On the other hand, France’s share of global GDP is less than 3%, half of what it was in 1980. Despite France’s debt burden rising to 119% of GDP, the currency bloc’s overall debt burden has fallen since the Greek crisis, now standing at a manageable 89%.

According to BlackRock, the region is far better prepared for financial stress than it was back then. Banks are stronger, and the ECB has vast experience and the tools to stabilise markets. Yet it was precisely the banking system that contributed to the European debt crisis in 2011–2012, as credit institutions were burdened by the debt of the eurozone’s peripheral countries. At present, banks’ share prices – with the exception of French banks – are showing no sign of falling.

If there is no repeat of the European crisis of 14 years ago, the sell-off in EURUSD has gone too far. The euro is gaining momentum for a rebound, supported by a pause in the Fed’s rate rises until December. Furthermore, there is a high chance that the Democrats will gain control of Congress following the midterm elections and will then throw a spanner in the works of Donald Trump’s inflationary policies.

Summary: EUR/USD may rebound if the risks of a new European debt crisis are exaggerated, the Fed pauses until December, and the dollar gets no help from oil, yields or equities. 

The Euro-Dollar Rate Edges Higher as Crédit Agricole Raises Its ECB Rate Forecast The Euro is recovering against the US Dollar, but Crédit Agricole's higher ECB rate forecast still leaves it cautious about market tightening bets. The Euro-to-Dollar exchange rate recovered to $1.1230 on Tuesday morning, up 0.15% from Monday's close.

Latest Exchange Rates:

Euro to Dollar (EUR/USD): 1.121472 (+0.01%)

Pound to Dollar (GBP/USD): 1.334184 (+0.24%)

Dollar to Yen (USD/JPY): 158.16954 (-0.23%)

Crédit Agricole has raised its forecast for the European Central Bank's peak deposit rate to 3% in March 2027, adding another increase to its previous outlook.

Yet its new forecast remains below the eventual peak markets were pricing when the bank made the revision.

UBS separately expects EUR/USD to recover to $1.16 by end-2026 and $1.20 by June 2027, provided European risks become less damaging than investors fear.

The latest French unrest is an immediate test of that confidence.

More ECB tightening, but less than markets expect Crédit Agricole's Louis Harreau expects quarter-point increases in December and March, with an October rise still possible but unlikely.

Higher oil and gas prices have pushed the bank's inflation forecasts upwards, leaving underlying price growth uncomfortably high through next year.

Harreau writes: "In our view, our new inflation forecasts warrant deposit rate hikes until 3.0%. But as things stand currently, we see no reason for the ECB to hike to 3.25%."

"Of course, if gas prices continue increasing, then our core inflation forecasts would change and accordingly our ECB scenario."

The bank expects core inflation to peak in the first quarter of 2027 before easing, weakening the case for extending the hiking cycle beyond March.

Harreau writes: "Until March 2027, we are more or less aligned with the current market pricing (as we have upwardly revised our call and the market has de-priced some hawkishness)."

"Beyond March 2027, markets expect one more hike-by around July 2027. Again, we see this pricing as too high, but 3.25% is still within the limits of what is possible."

Harreau also identifies a larger disagreement further ahead, with markets not pricing the eventual cuts Crédit Agricole expects as inflation declines.

An upward revision to one bank's forecast therefore need not lift the Euro if investors are already assuming a stronger tightening cycle.

The ECB itself remains cautious about how widely expensive energy is spreading through the economy.

In her latest statement to the IMF's policy committee, Christine Lagarde said wage growth had shown no material response to the energy shock and that underlying inflation measures remained broadly stable in September.

She also noted that financing conditions had tightened as long-term interest rates rose.

French bond stress complicates the recovery That tightening can occur without another ECB decision.

Investors demanding a higher premium to lend to France can also raise funding costs for private borrowers, restraining activity and reducing the amount of additional monetary tightening required.

Crédit Agricole warns that either a sovereign crisis or the fiscal retrenchment needed to repair France's finances would hurt growth.

On Monday, French bonds sold off following weekend riots, with MarketWatch reporting that the 10-year yield rose nearly six basis points to 4.845% early in trading as investors questioned the government's ability to reduce its deficit.

UBS's recovery forecast, published before that unrest, depends partly on a budget agreement restoring confidence.

Its strategists Constantin Bolz and Clémence Dumoncel write: "Although the fiscal situation in France remains challenging and is unlikely to improve materially in the near term, we do not expect a broader European debt crisis."

"Instead, we believe some form of budget agreement is likely to be passed, potentially through the use of Article 49.3."

The bank expects an agreement to narrow France's borrowing premium over Germany and help the Euro recover.

A budget agreement could give the recovery more lasting support than the oversold conditions Scotiabank identified near $1.11.

UBS's longer-term currency forecast also relies on relief from Europe's energy bill.

The UBS strategists write: "With the situation in the Middle East unresolved and the Northern Hemisphere entering the winter season, it is difficult to envisage a significant near-term decline in energy prices. However, in our base case, we expect energy prices to moderate during 2027, particularly after the winter period with Brent oil prices approaching 80 USD/bbl next summer."

Oil and US yields could still pull the Euro lower Standard Chartered's Steve Englander cautions against treating the Euro's difficulties as exclusively French.

His analysis links the recent decline to higher US yields relative to Germany, widening borrowing premiums within the Eurozone and rising oil prices, while acknowledging that their separate effects are difficult to isolate.

Those risks are related: stronger US growth can lift Treasury yields while increasing concern about Europe's capacity to cope with higher borrowing costs.

Englander writes: "Alternatively, if the driver of higher yields is higher oil prices, all three EUR negatives could be pushing in the same direction simultaneously, as has been the case over the last seven weeks."

"Even having two of three factors pushing in the same direction is likely to be enough to put some downward pressure on the EUR. So while the market may pause to absorb recent moves, we could easily see a resumption of EUR depreciation down the road."

EUR/USD Exchange Rate FAQ What is UBS's EUR/USD exchange rate forecast?

UBS expects $1.16 by end-2026 and $1.20 by June 2027. Its recovery case includes lower energy prices and reduced French political uncertainty.

Does Crédit Agricole expect more ECB rate rises?

Yes. It forecasts quarter-point increases in December and March, taking the deposit rate to 3% in March 2027. That is an interest-rate projection, not an exchange-rate target.

Why might higher European rates fail to lift the Euro?

Some tightening is already priced in. Expensive energy and widening government borrowing premiums can also weaken growth and confidence in European assets.

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Summary:

The EUR/USD pair is held in a tight range ahead of the upcoming statement by Christine Lagarde ahead of the ECB decision.
EUR/USD is stuck in a tight range today, with investors focusing on last week’s macro events,  the ongoing performance of the energy markets, and the ongoing protests in France. It is also wavering ahead of a relatively muted week in the economic calendar. It was trading at 1.2225, a few points above this week’s low of 1.1110.

France Protests and Christine Lagarde Statement
EUR/USD pair is attempting to rebound, even as fears of a debt crisis in Europe continue. These fears escalated during the weekend when protests in France turned deadly. The core issue among the protesters is the slashing of the education budget. 

The government slashed spending because of the ongoing surge in public debt that has pushed the ten-year yield to 4.88%. This is a high level since the figure bottomed out at 3.216% in March this year. Bond yields in other European countries like Germany and Italy have continued rising. 

The EUR/USD pair is also wavering as crude oil prices retreat. Brent, the global benchmark, dropped to $108 from last week’s high of $110. Still, there is a risk that the ongoing oil price retreat is temporary, as fundamentals favor more gains. Iran has continued shooting tankers attempting to cross the strait, while oil inventories have continued falling. 

There will be no major macro numbers from the United States this week. The only macro catalyst to watch this week will be a statement from Christine Lagarde, the head of the European Central Bank (ECB). Her statement will come ahead of next week’s interest rate decision, in which officials are expected to leave interest rates unchanged.

The key macro data to watch this week will be the German PPI and European consumer confidence report.

EUR/USD Technical Analysis

EUR/USD chart | Source: TradingView

The four-hour chart shows that the EUR/USD pair has rebounded in the past few days. It has risen from 1.1112 on October 14 to the current 1.1223. A closer look at has formed an inverted head-and-shoulders pattern, a popular bullish reversal sign. 

The pair has jumped above the 50-period Exponential Moving Average (EMA) and the Strong, Pivot, Reverse level of the Murrey Math Lines tool. Therefore, the pair will likely have a bullish breakout, potentially to the psychological level of 1.3000. A move above that level will point to more gains towards the Ultimate Resistance level of 1.1352. 

ING’s Francesco Pesole says EUR/USD is modestly undervalued versus short-term fair value around 1.137–1.139, but ongoing French fiscal concerns and protests may limit gains. He sees risks as balanced, with downside from France and upside from further AI-related pressure on Fed expectations, and keeps a one-month EUR/USD target at 1.130.

French protests and AI keep risks balanced
"EUR/USD briefly dropped back below 1.120 overnight before inching higher again this morning. The move in short-term rate differentials has pushed our short-term fair value estimate for EUR/USD higher to around 1.137-1.139. The current undervaluation is therefore around 1.3-1.5%, broadly consistent with French fiscal risk remaining very much present, as reflected in the 10yr OAT-Bund spread hovering around 135-140bp."

"Markets have appeared tentatively more relaxed about the budget situation. Still, continued widespread protests in France over the weekend should weigh on domestic stocks and could spill over into the bond market. We doubt that is enough to drive further sustained widening per se, but it may limit EUR/USD's ability to return to Friday's levels."

"On the macro side, the highlight of the week is Friday's PMI release. Expectations are for a modest softening in the eurozone composite figure, while remaining well inside expansionary territory. Tomorrow, Germany's ZEW index will be in focus."

"The balance of risks for EUR/USD is fairly even at this stage. Downside risk continues to stem from France, although it has abated somewhat as of late, while the upside comes from further AI concerns hitting Fed rate expectations. Our month-ahead target remains 1.130."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Euro Technical Forecast: EUR/USD Weekly Trade Levels EUR/USD has fallen more than 5% from the August high, with the latest rebound snapping a five-week losing streak. The decline has reached a major technical support confluence, raising the prospect of a larger price inflection. Weekly momentum has deteriorated and although the broader bearish outlook remains intact, the bears may be vulnerable above critical support. Bulls face significant overhead resistance, with a stronger recovery needed to suggest a more meaningful low is in place. Eurozone and U.S. PMI data headline next week's event risk ahead of the Fed and ECB rate decisions later this month. Resistance 1.1276, 1.1355/65 (key), 1.1483- Support 1.1110/63 (key), ~1.1030s, 1.0905 EUR/USD enters the second half of October at a critical technical juncture after sustained selling pressure drove the pair to its lowest levels in 17 months. The latest recovery offers an initial sign of stabilization, but the broader downtrend remains firmly intact as buyers confront significant resistance overhead. With weekly momentum deeply stretched, the immediate focus is on whether Euro can build on this initial rebound or whether renewed selling pressure triggers another leg lower. Battle lines drawn on the EUR/USD weekly technical chart.

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Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Q4 Outlook we noted that EUR/USD was trading into a pivotal support into the close of Q3 and that, “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.” Euro broke below support the following week with price plunging more than 5.1% off the August highs. The decline has already extended into the next major support barrier with EUR/USD snapping a five-week losing streak on Friday.

The support zone in focus is 1.1110/63- 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). Weekly RSI has now fallen to the lowest levels since January of 2025 and while the momentum profile continues to favor the bears, the downtrend remains vulnerable while above this key threshold.   

Initial resistance is eyed at the 2023 swing high at 1.1276 and is backed by bearish invalidation at the 38.2% retracement of the 2025 advance and the April 2025 high week close at 1.1355/65. A breach / weekly close above this key pivot zone is needed to suggest a more significant low is in place and a larger reversal in underway. Subsequent resistance objectives are eyed at the median line of the yearly downtrend (currently near ~1.1430s) and the 61.8% retracement of the August decline at 1.1483.

A break below last week’s low would keep the focus on the lower parallel of the yearly downtrend which converges on the 25% parallel of the broader 2025 uptrend near ~1.1030s. Look for a larger reaction there IF reached with a break / weekly close below likely to trigger another accelerated decline. Subsequent support objectives rest with the 61.8% retracement at 1.0905.

           

Bottom Line: EUR/USD responded to a major support zone last week and while the broader outlook remains weighted to the downside, the decline may be vulnerable while above this level. From a trading standpoint, rallies would need to be limited to 1.1355/65 IF price is heading lower on this stretch with a close below 1.1110 needed to fuel the next leg of the decline.

EUR/USD event risk is concentrated at the end of next week, with euro-area flash consumer confidence due Thursday and preliminary October PMIs on Friday. The PMI release will be the key test of whether the recent improvement in euro-area activity is holding into the fourth quarter and could directly shape expectations ahead of the ECB’s October 29 meeting. On the U.S. side, September housing data and the October flash PMIs are also due, while Fed officials remain in their blackout period ahead of the October 27–28 decision. The result is a data-heavy Friday where any divergence between European and U.S. activity could produce a sharp move in EUR/USD. Stay nimble into the releases watch the weekly close for directional guide. I’ll publish an updated Euro Short-term Outlook once we get further clarity on the near-term EUR/USD technical trade levels.

Key EUR/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts Swiss Franc (USD/CHF) Gold (XAU/USD) US Dollar Index (DXY) Canadian Dollar (USD/CAD) Australian Dollar (AUD/USD) S&P 500, Nasdaq, Dow Japanese Yen (USD/JPY) Bitcoin (BTC/USD) British Pound (GBP/USD) --- Written by Michael Boutros, Senior Technical Strategist

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United Overseas Bank’s Quek Ser Leang and Lee Sue Ann highlight that EUR/USD has rebounded strongly from 1.1112 to close at 1.1218, more than reversing the prior day’s losses. Short-term momentum looks overextended, with the pair expected to trade between 1.1180 and 1.1240 intraday. On a 1–3 week view, EUR is now seen in a broader 1.1160–1.1280 range after breaking 1.1220 resistance.

Euro-Dollar shifts into consolidation band"24-HOUR VIEW: EUR plunged two days ago and then rebounded strongly to close at 1.1156 (-0.38%). When EUR was at 1.1180 in the early Asian session yesterday, we indicated that “the recovery has scope to extend but any advance should stay within a 1.1155/1.1205 range.” We were incorrect, as EUR rose to 1.1240 before easing slightly to close 0.56% higher at 1.1218. The sharp advance appears to be overextended. This, combined with early signs of slowing momentum, suggests EUR is unlikely to rise much further. Today, we expect EUR to trade in a range between 1.1180 and 1.1240."

"1-3 WEEKS VIEW: We have been holding a negative EUR view for more than a month. After EUR dropped to 1.1112 and rebounded strongly, we highlighted the following yesterday (15 Oct, spot at 1.1180): “Further EUR weakness is not ruled out, but the decline from last month appears to be overextended, both time-wise and price-wise. However, only a breach of 1.1220 ( ‘strong resistance’ level) would mean that EUR is not declining further.” EUR subsequently rose and broke above 1.1220 with a high of 1.1240. EUR has likely entered a range-trading phase, and for the time being, it is likely to trade between 1.1160 and 1.1280."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Euro to Dollar Forecast: US Yields Hold Key to Analyst's Recovery View The Euro could recover against the US Dollar if Treasury yields retreat, UniCredit says, but French fiscal concerns are likely to constrain the rebound. A retreat in US Treasury yields could give the Euro breathing room after its recent sell-off, according to UniCredit, although the bank doubts that lower American borrowing costs alone would restore EUR/USD to 1.14.

EUR/USD traded near 1.1212 on Thursday afternoon, about 0.15% above Wednesday's close.

Latest-Exchange Rates:

Euro to Dollar (EUR/USD): 1.121453 (+0.17%)

Pound to Dollar (GBP/USD): 1.326362 (+0.24%)

Dollar to Yen (USD/JPY): 157.99011 (+0.02%)

The recovery follows a sharp reversal in bond markets after US consumer inflation initially sent Treasury yields higher, before an equity sell-off encouraged investors to buy government debt.

UniCredit's FX strategist Roberto Mialich sees scope for that yield relief to support the currency, but France's public-finance difficulties have weakened the case for a fuller recovery.

His assessment offers a counterpoint to MUFG's conditional warning about a break below 1.10, which linked further Dollar strength to higher US short-term yields.

US yields have set the direction UniCredit argues that the rise in American yields has mattered more for the Euro's recent direction than changes in the gap between US and German borrowing costs.

Mialich writes: "Hence, we can argue that the rise in the 10Y UST yield has determined the direction and the decline of EUR-USD, while the yield spread between the 10Y Bund and the UST has influenced the speed of the decline."

Mialich adds: "Despite the sharp rise in the 10 UST yield, EUR-USD has only lost around 5%, as the corresponding rise in the 10Y Bund yield has prevented a more intense fall of the common currency"

Higher German returns have helped offset the appeal of US bonds.

Mialich writes: "In addition to the clear relationship visible in the chart, the results of our calculation are quite comforting: correlation is over -0.60, suggesting that a rise in the 10Y UST yield tends to be sufficiently EUR-USD negative and vice versa."

Mialich cautions that German-US yield spreads could exert a stronger influence again.

His recovery case depends on a meaningful retreat in US yields: "Still, if the soaring 10Y UST yield retreats from its current levels after reaching a twenty-year high of 5.3645% on 7 October and moves towards 5.00%/4.80% (the values prevailing in early September, before the bond market selloff), the EUR-USD decline may take a breather."

Fresh US inflation tests that recovery case Thursday's producer-price release makes it harder to assume that inflation will permit a sustained fall in yields.

US producer prices rose 1.3% in September, while the measure excluding food, energy and trade services increased 0.5%.

Those results arrived after UniCredit's assessment, which incorporated Wednesday's consumer-price surprise but not the subsequent producer figures.

Mialich explains the bank's policy assumption: "Note that such a correction in the 10Y UST yield would be in line with our baseline scenario, which includes just one more rate hike by the Fed this year and steady rates in 2027, the same picture New York Fed President John Williams depicted overnight."

If investors instead conclude that inflation requires a longer tightening cycle, the expected relief for EUR/USD could prove short-lived.

Buying Treasuries during a stock-market decline can lower yields temporarily without resolving that policy risk.

Even if US yields do fall, UniCredit does not expect the Euro simply to recover its early-September trading range.

Mialich writes: "However, lingering political tensions across the eurozone and concerns regarding public finances in France may thwart a potential EUR-USD recovery. In early September, the pair traded between 1.15 and 1.16. Re-approaching or even exceeding 1.14 has probably become a difficult task at this point."

UniCredit attaches no deadline to that recovery hurdle.

EUR/USD exchange rate FAQ Is 1.14 UniCredit's forecast target?

No. It is a level the bank considers difficult to regain, without assigning a deadline.

What could support a Euro recovery?

UniCredit expects lower US Treasury yields to relieve some of the pressure on EUR/USD.

Why might the rebound remain limited?

French fiscal concerns could weigh on the Euro even if US yields fall, while fresh US inflation threatens that yield-retreat assumption.

EUR/USD Outlook: MUFG Links Sub-1.10 Risk to Higher US Yields
Hotter US inflation has reinforced MUFG's downside scenario for the Euro against the US Dollar, despite its doubts about the scale of Fed tightening.
MUFG's warning that the Euro could fall below $1.10 has gained relevance after stronger-than-expected US inflation revived the case for higher interest rates.

The bank outlined that possibility before Wednesday's CPI release, linking it to its projections for US two-year Treasury yields and a potential rise in the Dollar Index to 105.

At the time of writing, EUR/USD traded near $1.1153, down 0.43% from Tuesday's close, having recovered some ground from the afternoon sell-off.

Derek Halpenny, MUFG's head of research for global markets EMEA and international securities, wrote ahead of the data: "Based on our 2-year UST bond yield projections, the DXY could certainly advance to the 105-level that would imply EUR/USD potentially falling below the 1.1000-level."

This is a conditional downside scenario, with no deadline attached to the exchange-rate level.

Image: EUR/USD intraday chart post US inflation release.

The inflation surprise MUFG had warned about
The September CPI release showed prices excluding food and energy rose 0.3% on the month, against expectations of 0.2%, while annual headline inflation reached 3.7%.

Before the release, Halpenny wrote: "Near-term though the Fed look set to hike again and any upside surprise in today's data would likely trigger another rates sell-off and extend the dollar further stronger."

Selling Treasury bonds pushes their yields higher, and the two-year yield is particularly sensitive to the expected path of Fed interest rates.

Higher prospective returns on Dollar assets can then attract demand for the currency, providing the link between MUFG's yield projections and its EUR/USD warning.

The bank had set a demanding condition for a move in the opposite direction: "A consensus CPI print today is unlikely to alter rate expectations much and a meaningful miss to the downside (0.0% m/m core) would be required to see a notable dollar sell-off."

Wednesday's result went the other way, though it does not establish how far the subsequent repricing will run.

Halpenny had acknowledged a reason to tighten policy ahead of clearer evidence of wider inflation: "It's understandable that precautionary rate hikes will be seen as sensible given the risks of pass-through."

Why MUFG still questions a longer hiking cycle
Halpenny's pre-release policy view for December 2026 and beyond was explicit: "Still, we remain sceptical that inflation pressures will continue to build and while we expect the Fed to hike again in December, we do not expect the Fed to deliver the two further rate hikes currently priced by the markets."

"The inflation backdrop doesn't appear to be as bad as might have been expected when the conflict first started and if an assumption had been made that it would still be impacting energy supplies by the following October."

That position rested partly on the recent behaviour of core personal consumption expenditures inflation, a separate measure from CPI.

He wrote: "Taking the PCE measure of inflation, the annualised 3mth change fell in August to the Fed's 2.0% inflation target for the first time since July 2024."

The three-month annualised reading measures recent momentum, rather than the annual headline PCE change used in the Fed's longer-run inflation objective.

It also predates September's stronger CPI report.

Halpenny added: "There is little evidence of pass-through that likely reflects the fact that the non-AI economy in the US remains relatively weak."

That judgement now faces a more difficult test, with RBC's post-release warning about spreading price pressures, covered by Exchange Rates UK, highlighting the risk that higher transport and import costs are reaching a wider range of goods.

MUFG also questioned how restrictive policy would become if the anticipated hikes were delivered as inflation moderated.

Halpenny wrote: "If we project forward current market pricing for the Fed's policy rate by the middle of next year and use the consensus inflation forecast, the implied real fed funds rate reaches 2.60%, not far from the peak restrictiveness seen following the global inflation shock."

"We don't believe the Fed will need to raise rates to that level."

The calculation describes borrowing costs adjusted for expected inflation under market pricing, rather than MUFG's own forecast for the nominal policy rate.

A retreat in those expectations would weaken an important source of Dollar support, but prolonged energy disruption remains a risk to that outcome.

Halpenny warned: "Inflation risks ahead remains the dominant concern of central bankers given the extended period of elevated energy prices risks feeding more broadly into non-energy inflation."

EUR/USD exchange rate FAQs
Is EUR/USD below 1.10 MUFG's dated forecast?

No. It is a conditional downside scenario linked to the bank's US Treasury-yield projections and a possible Dollar Index rise to 105.

Why does stronger US inflation matter for the Euro?

It can increase expectations for Fed tightening, supporting US yields and demand for Dollar assets at the Euro's expense.

Does MUFG expect a prolonged Fed hiking cycle?

Before the CPI release, MUFG expected a December 2026 increase but doubted that the Fed would deliver the two further rises then priced by markets.

United Overseas Bank’s Quek Ser Leang and Lee Sue Ann highlight a strong EUR/USD rebound to around 1.1200 after recent oversold weakness. In the near term, they see scope for the Euro to challenge resistance at 1.1220, while a sustained break would signal that the month-long downtrend has stabilised. However, they still flag deeply oversold conditions and acknowledge that further downside cannot be fully ruled out.

Euro recovery challenges 1.1220 barrier"24-HOUR VIEW: EUR fell sharply to a low of 1.1151 two days ago. Yesterday, we stated that “further EUR weakness is not ruled out, but given the oversold conditions, any decline should stay within a 1.1145/1.1185 range.” We were incorrect, as EUR rebounded strongly to a high of 1.1204. The advance has gained some momentum, and today, the rebound could potentially break above the strong resistance at 1.1220. We do not expect the major resistance at 1.1270 to come into view. However, it remains to be seen whether it can maintain a foothold above this level. Support is at 1.1185, followed by 1.1170."

"1-3 WEEKS VIEW: We highlighted yesterday that “the weakness in EUR that started more than a month ago has not quite stabilised, and EUR could decline gradually toward 1.1115.” We did not expect EUR to rebound strongly to a high of 1.1204. Downward momentum is fading rapidly with the strong rebound, and a break above 1.1220 (no change in ‘strong resistance’ level) would mean that the decline that started more than a month ago has stabilised."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

After falling for the fifth consecutive week, the EUR/USD has kicked off this week on a downbeat note. As well as macro pressures, strong bearish momentum prevented the pair from staging a meaningful comeback earlier in the day, leading to weakness in the afternoon trade. The popular pair could be heading towards the 1.10 handle barring a surprise reversal in the dollar’s bullish trend, or improvement in euro area fundamentals. But further ahead, perhaps later in the year or in early 2027, the EUR/USD outlook could a lot more stable. For now, only with a sharp drop in oil prices, or if we see the return of the US dollar debasement trade amid concerns over US fiscal policy, could one expect the single currency to end its bearish bias. For now, US inflation remains sticky, Treasury yields are elevated and expectations of tighter Fed policy should keep the greenback supported against major currencies.  A potentially hot US September CPI report this week could reinforce these expectations.

French fiscal risks, oil pressure keep EUR/USD outlook undermined
The US dollar remained in demand in the first half of Monday’s session, weighing on the major FX pairs. News over the weekend, including continued Houthi strikes in Riyadh has had negative impact on foreign currencies so far, especially those where the economy relies on energy imports. The EUR/USD is particularly vulnerable as lingering concerns over French fiscal policy continue to undermine the euro. With French elections in April 2027, fiscal concerns could continue to weigh on the single currency in the weeks ahead. For now, I expect the EUR/USD to remain in a moderately bearish trend and potentially visit the 1.10 level in the coming days or weeks.

A sharper deterioration in French bonds could accelerate the euro selling pressure, especially if the contagion spreads to other European countries. That outcome could force the ECB to abandon further rate hikes and potentially even halt quantitative tightening. In that scenario, it will have to absorb higher inflation in order to avoid further chocking the economy.  

For now, high US yields, elevated energy prices and rising cross-market volatility create a tougher environment for the euro and emerging-market currencies. The dollar remains the safer bet until the macro backdrop starts to turn.

Technical analysis: EUR/USD on the brink
The EUR/USD remains under heavy pressure, having closed lower for the fifth consecutive week last week. From a technical analysis perspective, therefore, momentum is clearly bearish, with price consolidating near the recent range lows in recent days.

Source: TradingView.com
The 1.1215/20 level, marking the 127.2% Fibonacci extension level of the last upswing that began back in June, has now turned into resistance. So, this is an important level to watch on the EUR/USD chart in the week ahead. A break back above it could see the level turn back into support and potentially signal some stabilisation.

If that doesn’t happen and we continue to see weakness in the currency pair, the immediate downside target is the liquidity sitting below last week’s low, around 1.1160.

If that level breaks, 1.1000 would become the next major downside target, with 1.1100 likely to attract some attention on the way down.

Meanwhile, the 161.8% Fibonacci extension of the last upswing that began back in June comes in at around 1.1085, making this another important downside level to watch.

On the upside, 1.1215/20 is the first key resistance. Above that, there isn’t much in the way of obvious resistance until the 1.1325–1.1355 area.

EUR/USD Recovery Outlook: UBS Questions European Risk Discount The Euro could recover against the US Dollar as investors reassess European risks and crowded currency positions, according to UBS strategists. UBS expects the Euro to recover to $1.20 by June 2027, arguing that a rush towards the US Dollar has pushed the exchange rate below what the relative performance of the two economies justifies.

EUR/USD ended Friday near $1.1201 after losing 2.5% in September, leaving the bank's mid-2027 projection roughly 7% above that closing level.

Latest-Exchange Rates:

Euro to Dollar (EUR/USD): 1.120134 (-0.10%)

Pound to Dollar (GBP/USD): 1.323299 (+0.03%)

Dollar to Yen (USD/JPY): 158.32755 (+0.17%)

The nearer objective is $1.16 by December 2026.

UBS strategists Constantin Bolz and Clémence Dumoncel write: "While we acknowledge the US growth advantage, we believe markets have become overly pessimistic on Europe. European data have remained more resilient than expected despite geopolitical tensions and higher energy prices. As a result, EURUSD now appears weaker than relative economic fundamentals would suggest."

The forecast requires investors to attach less weight to the risks facing Europe, allowing the exchange rate to recover even if the US economy continues to perform better.

The German government's latest autumn economic forecast raised expected 2026 growth to 1.3%, from 0.5%, helped by exports and defence and infrastructure activity.

Weak private consumption and investment remain qualifications, but the revision challenges the idea that Europe's energy exposure has overwhelmed its capacity to grow.

Image: Euro US Dollar Exchange Rate - EUR/USD - Quote - 5-Day Chart France and energy fears drive a larger discount UBS says: "The move has been driven by stronger US economic data, concerns over a potential US diesel export ban, rising global yields, and growing worries about France's fiscal outlook. Together, these factors have boosted the USD and weighed heavily on the euro."

A lasting deterioration in European growth would weaken the recovery case more fundamentally than a feared disruption that never materialises.

Bolz and Dumoncel write: "We are also sceptical that some of the recent USD-positive drivers will have a lasting impact. A diesel export ban remains a low-probability scenario, in our view, while European energy prices remain well below the levels seen during the 2021-22 energy shock."

France presents a more difficult judgement because the effect on the Euro depends partly on where investors move their money.

Selling French government bonds to buy German debt need not create the same currency pressure as withdrawing money from Euro-denominated assets altogether.

Recent Exchange Rates UK coverage of Rabobank's warning about French debt contagion examined precisely that risk of a wider retreat from the region.

UBS's Bolz and Dumoncel write: "In addition, EURUSD has historically shown limited sensitivity to French-German yield spreads and market attention may soon shift toward the US midterm elections, which could inject more volatility."

Crowded Dollar positions could magnify a reversal Investors who have already bought Dollars and sold Euros have helped drive the decline, but those positions also create potential buying demand if the evidence starts to move against them.

Bolz and Dumoncel write: "Most importantly, positioning and options data suggest the market has become crowded in favor of the USD. While this does not rule out further dollar gains in the near term, it makes the risk-reward of chasing EURUSD lower increasingly unattractive."

That argument builds on UBS's earlier expectation that European resilience would support a Euro recovery, but now gives positioning a prominent role in the potential rebound.

UBS spells out the conditions that could overturn its view: "Further beats for US economic activity, a renewed rise in global bond yields, a material deterioration in European growth prospects, or a significant escalation in fiscal concerns for France could push EURUSD lower. Conversely, softer US data, fading geopolitical concerns, and a stabilization in European sentiment could accelerate a recovery in the pair."

EUR/USD Exchange Rate FAQ What is UBS's EUR/USD forecast?

UBS expects $1.20 by June 2027, with a nearer objective of $1.16 by December 2026.

Why does UBS expect the Euro to recover?

It sees excessive pessimism about Europe and crowded Dollar positions that could unwind if sentiment improves.

What could prevent a rebound?

Stronger US data, rising bond yields, weaker European growth or worsening French fiscal concerns could keep EUR/USD under pressure.

EUR/USD Talking Points:
The US Dollar is overbought and EUR/USD is oversold, and while those markers don’t demand definite reversal, it does raise the stakes for continuation.
So far, buyers have only been able to pose a minor bounce and as looked at in the webinar yesterday, there’s not yet evidence that there’s enough motivation to produce a reversal move.
I looked into this coming into the week, highlighting EUR/USD in the top five charts for the week ahead, and that theme remains of interest as the pair has pushed down to a fresh yearly low.

In yesterday’s webinar, there was a bounce in-play but as I said then, there wasn’t yet enough evidence to substantiate whether that bounce was just an oversold pullback or the start of something larger. At this stage, it seems it was more of the former than the latter, but there’s still potential given that price hasn’t yet taken out the Monday low.

For that to work and for a bounce to set up in the back-half of the week, bulls will need to show up and hold the low above 1.1161, which, so far, they have by 3.4 pips.

EUR/USD 30-Minute Chart
Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Most Oversold in a Decade
As I often say in webinars, RSI isn’t a great timing indicator as a market can often get more oversold or overbought. And any oscillator, RSI included, is a lagging indicator on an already lagging variable (price), so it’s a bit like looking at the world through rose-colored glasses.

This isn’t to say that the indicator is completely worthless, however, as it can provide some good information. And perhaps more important than using it to get into trades is using it to stay out of markets in an extreme state of stress.

At a close below 20 last week, EUR/USD was more oversold than it had been since 2015. That prior instance was an extreme period of stress, but the sub-20 RSI read showed around a significant low, after which the pair was rangebound for much of the next two years.

EUR/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview

EUR/USD with Perspective
The daily chart highlights the theme well and RSI remains in oversold territory. But, given the prior element of divergence with the Monday low in price producing a higher-low via RSI, it illustrates just how stretched the move has become.

This is a deduction, however, and not quite a thesis that builds into a bullish backdrop: It simply sets the stage for which buyers can make a move and, at this point it’s still quite early to forecast a trend change.

There is, however, the possibility for reversal strategies if (and it’s a big ‘if’) that low can hold on the above shorter-term chart.

EUR/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro

The dollar was back on the front foot after a brief pause, with EUR/USD, gold and silver all slipping as bond yields and crude oil both pushed higher. There is not much on the calendar today until the release of the September FOMC meeting minutes. At that meeting, the Fed’s dot plot and Chairman Kevin Warsh’s press conference already tilted hawkish, so the minutes are unlikely to deliver much of a dovish surprise. At the same time, recent US data have been soft. So, the bar for another meaningful leg higher in reaction to the FOMC minutes for the dollar is high. The greenback is more likely to find continued support if oil prices push further higher after yesterday’s impressive recovery from a 3% decline earlier in the day. This means that the EUR/USD forecast remains titled to the downside for now.

Keep an eye on oil prices
Oil remains the key swing factor. Brent is back above $100 a barrel as concerns over the Strait of Hormuz persist, keeping pressure on bond markets and limiting the scope for a sustained dollar pullback.

Source: TradingView.com
Until something changes drastically, I can’t see oil prices falling back meaningfully any time soon, despite reports that the flows through the Strait have improved in recent weeks. So much oil has been lost that it will take a significant amount of time to return to pre-war levels. Let’s not forget that those depleted global oil inventories will need to be filled and soon. This will keep demand for oil high at the time when supply is restricted. Crude oil, therefore, have to rise to a new equilibrium price soon, if there is no meaningful shift in the supply curve. At the very least, expect oil prices to remain elevated for a while yet and this should keep inflation and stagflation concerns high. While oil flows may have improved, the risk of further disruption has not gone away. With little evidence of an imminent deal, elevated energy prices remain a constraint on any meaningful recovery in bonds and, by extension, on a sustained decline in the dollar. This should keep the EUR/USD forecast tilted to the downside until something changes.

Dollar will need to find something new from the FOMC minutes 
Tonight’s release of the September FOMC minutes will be watched closely by the FX markets. Investors will be looking for clues on the Fed’s reaction function, particularly what kind of inflation outcome would be enough to justify another rate hike this year. Any discussion around the dovish dissent will also attract attention. 

But the minutes may struggle to deliver the dovish surprise some dollar bears are hoping for. Reall that the dot plot showed four policymakers expecting two further hikes this year, compared with just two expecting no additional tightening. 

At the same time, the data since the September meeting have been relatively soft and markets already have pushed their expectations to a December hike from October.  That means the bar for the minutes to generate another significant dollar rally is also high. 

EUR/USD forecast: France is not out of the woods 
French sovereign spreads may have narrowed a bit in recent days, helped mainly by the broader improvement in global bond sentiment, although Marine Le Pen’s pledge to bring France’s budget deficit down sharply to 3.7% of GDP next year also provided some support. But don’t expect that to be the end of it. For indeed, it is too early to call this a meaningful turning point for French assets.

Le Pen is clearly trying to position herself as a more market-friendly candidate, but the credibility of the fiscal adjustment remains the sticking point. The proposed €140 billion of savings look ambitious to say the least and it will be seen how it will be delivered.

That makes it difficult to see yesterday’s narrowing in spreads as the beginning of a sustained French bond recovery. 

Technical EUR/USD forecast and key levels to watch 
From a technical analysis point of view, the EUR/USD had broken key weekly support around the 1.1360 area, so the bias remains tilted to the downside. The pair found some support around the 127.2% extension of the last upswing at 1.1220 earlier this week, but the selling has now resumed after the pair was unable to break above 1.1260 short-term resistance.

Source: TradingView.com
The next major downside area on the EURUSD chart I am watching comes in around 1.1085, the 161.8% Fibonacci extension. Below that, the 1.1000 handle could be the next stop.

Watch: EUR/USD and gold analysis

Frequently asked questions 
Could tonight’s FOMC minutes change the dollar outlook? 
The key is whether the minutes add something new about the Federal Reserve’s reaction to inflation. The hawkish dot plot limits the scope for a dovish surprise, but softer subsequent data also raise the bar for another significant dollar rally. 

Does narrower French debt pricing mark a turning point for the euro? 
I think it is too early to call a sustained recovery. Better global bond sentiment has helped, but the credibility of France’s proposed fiscal adjustment remains the sticking point. 

Are the deeper EUR/USD downside objectives a forecast for today? 
Not necessarily. However, the direction of travel seems to be southbound. So I wouldn’t be surprised if we got there as early as today – especially if oil prices spike. 

French Risk Has Brought the Euro to the Line; 1.1185 Decides Whether the Downtrend Accelerates What’s happening: EUR/USD fell to around 1.1160, its lowest since May 2025, before recovering to 1.12. French fiscal and political risk is the dominant Euro-specific pressure, while Spain’s snap election on November 29 has added a headline without comparable market stress. The pair pierced the 1.1185 Fibonacci projection but has not yet confirmed a break, even though Fed hike expectations have eased and French bond yields have stabilized somewhat.

Why it matters: Neither interest-rate differentials nor a generalized Eurozone panic explain the move; it is French-specific risk with broader Euro implications. A decisive loss of 1.1185 would strengthen the case that the decline from 1.2081 is developing into an impulsive medium-term downtrend, with the current leg from 1.1710 potentially entering its strongest phase. The next move around 1.1185 will determine whether the bearish trend is solidified and begins to accelerate.

EUR/USD has reached a point where today’s political headlines matter less for the size of the immediate move than for what could come next. The pair fell to around 1.1160, its lowest since May 2025, before recovering to 1.12. French fiscal and political risk remains the dominant Euro-specific pressure, while Spain’s snap election adds another headline without yet producing comparable market stress. France is identified as the main drag as EUR/USD hit a 17-month low, while Spanish equities largely shrugged off Prime Minister Pedro Sánchez’s call for a November 29 election.

The more important development is technical. EUR/USD has pierced 1.1185, the 100% projection of 1.1848 to 1.1323 from 1.1710, but has not yet confirmed a break. A decisive loss of that level would strengthen the case that the decline from 1.2081 is developing into an impulsive medium-term downtrend, with the current leg from 1.1710 potentially entering its strongest phase. In that sense, French political risk has brought the Euro to the line; the next move around 1.1185 will determine whether the broader bearish trend is solidified and begins to accelerate.

France Is the Core Risk, Spain Is Secondary Europe has two political stories today, but markets are not treating them equally.

France Fiscal Snapshot OAT-Bund spread: pushed above 100bp during September OAT-Bund spread: briefly above 150bp on Friday, before retreating France’s debt: around 119% of GDP France’s deficit: roughly 5.4%, which the government is trying to reduce through its 2027 budget In France, the repricing has been building for weeks. The OAT-Bund spread pushed above 100bp during September and surged to levels last seen during the Eurozone sovereign debt crisis period. The spread was briefly above 150bp on Friday, before retreating, as investors focused on France’s fiscal position and the difficulty of repairing it through a fragmented parliament ahead of the 2027 presidential election.

The fiscal backdrop explains why the political uncertainty carries market weight. Prime Minister Sébastien Lecornu’s government has proposed a combination of tax increases and spending restraint, but the legislation still faces a difficult parliamentary process.

The key point is that this is no longer simply a generic global bond-market selloff. France has developed its own risk premium. The widening relative to Germany—and the fact that French sovereign stress has at times exceeded Italy’s—shows investors differentiating between Eurozone credits rather than selling the bloc indiscriminately.

Spain is different.

Prime Minister Pedro Sánchez called an early election for November 29 after parliament rejected key housing measures, adding another layer of political uncertainty to Europe. But the market reaction has so far been restrained. Spanish equities remained positive on the day, while investors saw limited reason to worry about Spain’s finances given comparatively solid growth.

France vs Spain: How Markets Are Treating Each France Spain Political trigger Fragmented parliament and a difficult 2027 budget process Snap election on November 29 after parliament rejected key housing measures Fiscal backdrop Debt around 119% of GDP; deficit roughly 5.4% Limited reason to worry about finances given comparatively solid growth Market reaction OAT-Bund spread briefly above 150bp on Friday; CAC 40 underperforming Spanish equities positive on the day The distinction is simple:

France is being priced. Spain is being watched.

Bonds Stabilize, but Euro Keeps Falling That distinction also helps explain today’s cross-asset pattern.

French bonds opened under renewed pressure, but yields subsequently eased from their early levels and remained below last week’s peak. The OAT-Bund spread also pulled back from Friday’s extreme rather than extending immediately higher. That is important because today is not another acceleration of the bond shock.

Cross-Asset Moves EUR/USD: fresh 17-month low CAC 40: fell, underperforming the major European equity indices STOXX 600: advanced Spanish equities: gained DAX, FTSE and Ibex: firmer Instead, the incremental pressure is showing more clearly elsewhere. EUR/USD made a fresh 17-month low, while the CAC 40 underperformed the major European equity indices. Paris shares fell while the broader STOXX 600 advanced and Spanish equities gained.

The FX heat map adds another useful clue. The Euro is broadly weak against the Dollar, Sterling, Canadian Dollar and Australian Dollar, but there is no comparable cross-market surge into every traditional haven. That argues against treating today as a generalized systemic risk event.

French sovereign stress remains serious, but the immediate move looks more like a Euro-specific risk premium being expressed through the currency and French equities while the bond market pauses after last week’s repricing.

The Rate Story Alone Does Not Explain EUR/USD The usual interest-rate explanation is also incomplete.

Fed expectations have become less aggressive at the very front end after softer US labor data, with October hike probability sharply reduced. Normally, that should remove at least some Dollar support. Yet EUR/USD is still making new lows.

That suggests the Euro side of the equation matters increasingly. French fiscal uncertainty, fragmented sovereign pricing inside the monetary union, weak confidence around the durability of the regional recovery and elevated energy costs are creating a risk premium that ordinary rate-differential analysis does not fully capture.

This is particularly important because today’s Euro weakness is occurring even as French yields themselves stabilize somewhat. The market is no longer simply demanding a larger premium to hold OATs; the political and fiscal uncertainty is also being reflected in the currency.

That does not mean the bond problem has disappeared. It means today’s incremental repricing is being expressed more visibly elsewhere.

Why This Is Not Yet a Eurozone Panic There are several reasons not to overstate the move.

Four Reasons Not to Overstate It French yields are below last week’s extreme rather than accelerating through it. Spanish bonds and equities are not showing the same degree of stress. If France’s problems were rapidly becoming a broader Eurozone sovereign event, Spain and Italy would be expected to begin moving much more aggressively alongside it. Broader European equities are not collapsing. The CAC is the outlier, while DAX, FTSE and Ibex have been firmer. The currency heat map does not show the sort of uniform rush into defensive currencies associated with acute systemic stress. The right description is therefore French-specific risk with broader Euro implications, not contagion.

That distinction could change if the OAT-Bund spread drives decisively back through last week’s extremes while Bunds rally and peripheral spreads begin widening together. But that is not the configuration today.

French Bond Spread, Budget and Spain: What Could Change the Picture The first test remains the French bond spread. Another sustained move above the 140–150bp area, particularly if accompanied by renewed demand for Bunds and widening in Spain and Italy, would indicate that the stress is broadening rather than merely consolidating.

The second is the French budget process. Markets need evidence that the 2027 fiscal package can survive a fragmented parliament and produce a credible path toward stabilizing the debt burden. France’s proposed measures are substantial, but parliamentary amendments are expected and implementation remains central to the credibility question.

Spain’s November 29 election is a secondary political catalyst, but the more immediate question is whether Spanish assets continue to distinguish themselves from France.

For EUR/USD, however, the most important signal may arrive before any of those political events. It is already sitting on the level that can decide whether the existing decline becomes something materially larger.

EUR/USD Technical Outlook: 1.1185 Is the Decision Point EUR/USD is testing 1.1185, the 100% projection of the decline from 1.1848 to 1.1323, projected from 1.1710.

Today’s 1.1160 low pierced that level intraday, but EUR/USD recovered back above it. That makes the current setup a warning rather than a confirmed breakdown.

A decisive daily close below 1.1185 would materially change the technical picture. The decline from 1.2081 could then increasingly be interpreted as an impulsive sequence:

1.2081 to 1.1408, rebound to 1.1848, fall to 1.1323, rebound to 1.1710, followed by the current decline. That is, a 1-2-i-ii.

Under that count, the fall from 1.1710 would represent the potentially powerful wave iii of the developing bearish sequence.

Key EUR/USD Levels Level Significance 1.1710 A break above invalidates the impulsive count 1.1323 First critical resistance on any recovery; a sustained recovery above it would weaken the immediate impulsive count 1.1185 100% projection of 1.1848 to 1.1323 from 1.1710; the decision point 1.0904 Larger 61.8% retracement 1.0861 161.8% projection, the next major downside projection, close to the 61.8% retracement 1.0759 Next projection below the 1.0861–1.0904 zone The next major projection would be 1.0861, the 161.8% projection. That sits close to the larger 61.8% retracement around 1.0904, creating a significant downside target zone. Below there, the next projection lies around 1.0759.

The larger implication is more important still. A confirmed impulsive fall from 1.2081 would strengthen the case that EUR/USD has begun reversing the entire three-wave corrective rise from the 0.9534 low of 2022. That would represent a meaningful medium-term trend change rather than merely another pullback inside the previous recovery.

For now, however, that conclusion is premature. Daily RSI is already deeply oversold, and EUR/USD has recovered from below 1.1185 intraday. A daily close beneath the level is the first confirmation; a weekly close below 1.1185 would carry considerably more weight.

On any recovery, 1.1323 has become the first critical resistance. As long as that former support holds as resistance, downside risk remains dominant. A sustained recovery above 1.1323 would weaken the immediate impulsive count, while a break above 1.1710 would invalidate it.

French political risk has helped drive EUR/USD to this point. Whether 1.1185 now gives way will determine whether the Euro’s medium-term decline merely continues—or begins to accelerate.

Related Coverage Europe: Data and Sentiment Eurozone Sentix Slips as Expectations Fall, France Replaces Germany as the Main Concern: investor sentiment data pointing to the same geographic shift in worry that is driving the Euro-specific risk premium. Eurozone PMI Hits 41-Month High as Growth Broadens and Price Pressures Reheat: September growth at a 41-month high, but with stronger selling prices and backlogs that make the release notably more hawkish. Eurozone PPI Re-Accelerates as Energy Shock Spills Into Broader Producer Costs: August producer inflation re-accelerated, with stronger ex-energy prices suggesting pipeline pressure is broadening beyond energy. UK Composite PMI Falls to 52.0 as Growth Slows and Costs Rise: services still expanding but with slower new orders, falling employment and higher fuel and payroll costs. Gold, Yen and Asia-Pacific Gold: Fed Hike Delay Isn’t Relief, FOMC Minutes Put the Rate Plateau to the Test: the Gold angle on collapsed October hike odds, with Wednesday’s FOMC minutes testing the extended tightening path priced into 2027. Nikkei Eyes Record High, But Four Forces Stand Between USD/JPY and 164: why this equity breakout may not repeat the last run in USD/JPY, with 160 now inside a tougher resistance zone. BoJ Uchida: AI’s Demand Shock Has Arrived Before Its Productivity Payoff: the BoJ Deputy Governor on AI’s first macro impact arriving through demand, prices and easier financial conditions. Japan PMI Growth Slows, But Hiring and Price Pressures Stay Firm: a weaker services headline, but with faster hiring, rising backlogs and exceptionally strong selling-price inflation underneath. Australia PMI Services Falls to 51.9 as Growth Slows and Price Pressures Rise: softer activity and falling employment paired with faster input and output-price growth. FAQ Why is EUR/USD making new lows when Fed hike expectations have eased? Fed expectations have become less aggressive at the front end after softer US labor data, which should normally remove some Dollar support. Yet EUR/USD fell to around 1.1160, its lowest since May 2025. French fiscal uncertainty, fragmented sovereign pricing inside the monetary union, weak confidence in the regional recovery and elevated energy costs are creating a risk premium that rate-differential analysis does not fully capture, and that premium is now also being reflected in the currency.

Is France’s bond stress turning into a Eurozone panic? Not yet. French yields and the OAT-Bund spread have pulled back from last week’s extremes, Spanish bonds and equities are not showing the same stress, broader European equities are not collapsing and the currency heat map shows no uniform rush into defensive currencies. The better description is French-specific risk with broader Euro implications, not contagion. That could change if the OAT-Bund spread drives decisively back through last week’s extremes while Bunds rally and peripheral spreads begin widening together.

What would a break below 1.1185 mean for EUR/USD? 1.1185 is the 100% projection of 1.1848 to 1.1323 from 1.1710, and EUR/USD pierced it intraday without confirming a break. A decisive daily close below it would support reading the decline from 1.2081 as an impulsive sequence, with the fall from 1.1710 as a potentially powerful wave iii. The next projection is 1.0861, close to the 61.8% retracement around 1.0904, with 1.0759 below that. A weekly close below 1.1185 would carry considerably more weight, while a break above 1.1710 would invalidate the count.

Key Takeaways EUR/USD fell to around 1.1160, its lowest since May 2025, before recovering to 1.12, with French fiscal and political risk as the dominant Euro-specific pressure. France is being priced and Spain is being watched: the OAT-Bund spread was briefly above 150bp on Friday and French debt is around 119% of GDP, while Spain’s November 29 election drew a restrained market reaction. Today is not another acceleration of the bond shock: yields and the spread pulled back, and the pressure is showing more clearly in EUR/USD and the CAC 40. Rates do not explain the move: Fed expectations have become less aggressive, yet EUR/USD is still making new lows. This is French-specific risk with broader Euro implications, not contagion, though that could change if the spread breaks back through last week’s extremes while peripheral spreads widen with it. EUR/USD pierced 1.1185 but has not confirmed a break; a decisive daily close below would strengthen the impulsive count, and a weekly close below would carry considerably more weight. Below 1.1185 the next projection is 1.0861, near the 61.8% retracement around 1.0904, then 1.0759; 1.1323 is first resistance and a break above 1.1710 would invalidate the count. What to Watch Next For EUR/USD, the decision point is 1.1185: a daily close below is the first confirmation and a weekly close below would carry considerably more weight, while 1.1323 is the first resistance on any recovery. On the political side, watch whether the French bond spread makes another sustained move above the 140–150bp area, how the 2027 budget fares in a fragmented parliament, and whether Spanish assets keep distinguishing themselves from France ahead of the November 29 election.

The euro continues to face a challenging environment in the short term. The currency has struggled to regain ground against a U.S. dollar that remains firmly supported, a dynamic reflected in EUR/USD, which has now recorded three consecutive losing sessions and a decline of roughly 0.6%. More importantly, selling pressure has persisted even after the latest U.S. inflation data was released, suggesting that the market continues to favor the dollar over the euro. As long as this backdrop remains in place, bearish pressure could continue to play an important role in EUR/USD price action over the coming sessions.

PCE Takes Center Stage
One of the most important events of the trading session was the release of the U.S. Core Personal Consumption Expenditures (Core PCE) report, one of the Federal Reserve's preferred inflation gauges and a key indicator of consumer price trends.

The monthly reading came in at 0.2%, below market expectations of 0.3%. At first glance, this provided some relief by suggesting a modest easing in short-term inflation pressures. However, the annual measure remains close to 3.0%, a level that has shown little change since June. While inflation is no longer accelerating significantly, it also remains well above the Federal Reserve's long-term target.

As a result, markets have slightly reduced expectations of a more aggressive Fed. According to CME Group probabilities, there is now roughly a 60% chance that interest rates will remain unchanged at 4.00% during the October 28 meeting.

Source: TradingEconomics

Even so, the positive impact on the euro has been limited because the U.S. bond market continues to show remarkable strength. Despite the moderation in rate expectations, 10-year Treasury yields continue to move higher and are now approaching the 5.3% area, levels not seen in decades. Meanwhile, European bond yields have also recovered recently, but they remain significantly lower, trading closer to 4.0%.

This yield differential continues to support the relative attractiveness of U.S. assets and helps explain why demand for the dollar remains strong despite the softer inflation release.

Source: TradingEconomics

Against this backdrop, the euro continues to face a difficult environment. Although the inflation data partially reduced expectations of a more aggressive Federal Reserve, the bond yield differential continues to favor the United States. As long as this situation remains unchanged, the euro may continue to struggle to attract consistent demand, leaving the current selling pressure around EUR/USD in place over the coming sessions.

Is the ECB Still Relevant?
It is also important to monitor developments surrounding the European Central Bank (ECB). Current market probabilities continue to reflect a relatively neutral stance from policymakers. Expectations for the October 28 meeting indicate roughly a 70% probability that the ECB's deposit rate will remain unchanged at 2.5%.

These expectations are largely driven by the fact that inflation pressures across Europe have not been strong enough to justify another aggressive tightening cycle. In addition, ECB officials have maintained a relatively cautious tone in recent weeks, reinforcing expectations of policy stability.

Source: ECBWATCH

This remains important because part of the dollar's recent strength continues to be supported by the interest-rate differential between the United States and Europe. Unless markets begin to see signs of a more hawkish ECB willing to narrow that gap, dollar-denominated assets may continue to retain a meaningful relative advantage. Under this scenario, the euro could remain under pressure, leaving EUR/USD vulnerable to further downside in the near term.

EUR/USD Technical Forecast

Source: StoneX, Tradingview

The broad trading range is entering a risk zone: For much of 2026, EUR/USD has traded within a wide consolidation range that has dominated price action and prevented the development of a sustained directional trend. However, recent weakness has placed the lower boundary of that structure under increasing pressure. If selling pressure continues to build, a bearish breakout could emerge and open the door to a more established downward trend.

 
MACD: The MACD histogram continues to trade below the 0 neutral line, indicating that short-term moving-average strength remains biased to the downside. As long as this behavior persists, selling pressure may continue to dominate.

 
RSI: A similar picture can be observed in the RSI, which remains below the 50 neutral level. This reading reinforces the relevance of bearish momentum within the market. However, the indicator is now also trading below the 30 oversold threshold, suggesting that recent selling pressure may have become excessive and could create room for short-term bullish corrections.

 
Key Levels:

1.15352 – Key Resistance: This level coincides with the 50-period simple moving average and represents the most important barrier for recovery attempts. Price action returning toward this area could reinforce the importance of the broad trading range that has dominated much of the year and restore a more neutral tone to the chart.

 
1.14130 – Near-Term Barrier: A key retracement area observed over recent weeks that could become the primary reference to monitor in the event of short-term bullish corrections.

 
1.12602 – Critical Support: A level not seen since May 2025 that represents the most important downside barrier below the current trading range. Sustained moves toward this area could confirm the end of the broader consolidation structure and open the door to a more established bearish trend.

 
Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

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.

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.

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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Summary:

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.

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.

Stronger growth, lower unemployment, firmer inflation

Source: LSEG

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.

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.

Nordea expects further ECB increases in December and March, while Scotiabank sees scope towards 1.1700 if EUR/USD clears resistance.
The Euro to Dollar (EUR/USD) exchange rate recovered from a sharp fall below 1.1600 on Thursday as investors assessed US producer-price inflation and the European Central Bank’s latest rate increase.

At the time of writing, EUR/USD was trading around 1.1624, down 0.09% against the previous close, having rebounded from an intraday low near 1.1595.

Image: EUR/USD intraday chart showing immediate reation to the US PPI and ECB rate hike

Economists at Nordea believe the ECB has further tightening ahead, despite policymakers declining to commit to their next move.

“We maintain our baseline of two further 25bp rate hikes at quarterly intervals, with the next one in December and the second in March 2027.”

That path would take the deposit rate from 2.50% to 3.00%, providing potential support for the Euro through higher returns on euro-denominated assets.

Nordea sees more tightening behind cautious ECB language
The ECB raised its three key interest rates by 25 basis points, matching the increase Scotiabank had described as fully priced before the announcement.

Its monetary policy statement projected inflation at 3.0% this year and 2.5% in 2027, with the latter revised higher.

“We are not pre-committing to a particular rate path,” the ECB said.

Scotiabank had expected a forceful endorsement of further near-term tightening as recovering oil prices threatened broader price pressures.

Nordea reads the inflation projections as evidence that September’s increase will be followed by others.

“A very extended period of inflation above target strongly supports the case for more rate hikes.”

However, Nordea also notes that markets have moved to price a faster tightening path than its own forecast, leaving scope for those expectations to reverse if December remains the likeliest next move.

We believe that limits how much support the Euro exchange rates can draw from further hikes alone: their timing, and whether expectations move beyond what is already priced, will matter.

US inflation keeps the Dollar side of the trade unsettled
The US producer-price figures showed core prices, excluding food and energy, rose 0.2% in August, easing from July’s 0.3% increase, with annual inflation at 4.6%.

Headline prices increased 0.4% on the month and 5.4% annually as energy prices jumped 4.2%.

The slower monthly core reading offers encouragement, but persistent price pressure leaves the FED’s response an important constraint on Euro gains.

The recovery keeps Scotiabank’s case for a EUR/USD move towards 1.1700 in focus.

Its pre-release technical assessment nevertheless identified an obstacle just above current levels.

“The 200 day MA (1.1634) continues to offer resistance on a closing basis, and we continue to highlight the absence of any major resistance ahead of the local high around 1.17.”

A close above 1.1634 would strengthen the case for another attempt at 1.1700, while a renewed fall through the session’s 1.1595 low would undermine the recovery.