EUR/USD Price Forecast - EUR Holds 1.1690 Ahead of CPI and ECB Signals

The euro-dollar pair (EUR/USD) is consolidating around 1.1690 in the European session, caught between opposing forces of U.S. inflation risk and an upcoming European Central Bank announcement. The move follows a volatile week where the pair tested 1.1779 resistance before fading lower as geopolitical shocks and stronger dollar demand reasserted themselves. The euro’s inability to break through 1.18 underscores market hesitation ahead of CPI data and policy statements that could define the trajectory into Q4.

U.S. Inflation Dynamics and Federal Reserve Rate Path

The spotlight remains on U.S. consumer price data after the Producer Price Index fell -0.1% MoM in August, undershooting forecasts for a 0.3% gain. Analysts expect headline CPI to rise 0.3% MoM and 2.9% YoY, while core CPI is forecast to remain at 3.1% YoY. This backdrop matters for EUR/USD because softer inflation reinforces expectations for a Fed cut at the September 17 meeting. Fed funds futures currently price a 100% probability of a 25bp cut, with lingering speculation of a 50bp move. At the same time, jobless claims hit 263,000, the highest in four years, showing labor market weakness. Markets are pricing in as many as three cuts by year-end, which narrows the yield spread advantage that has favored the dollar for the past two years.

European Central Bank Holds at 2.15% but Guidance in Focus

On the European side, the ECB is widely expected to keep the main refinancing rate at 2.15% and the deposit rate at 2%. The bank paused after slashing borrowing costs by 200bps between June 2024 and June 2025. Policymakers face a fragile recovery with Eurozone GDP projected at 1.2% in 2025, 1.1% in 2026, and 1.4% in 2027, but political instability in France and Spain adds risk. President Christine Lagarde’s press conference is critical because traders want to know if cuts are done or if renewed weakness will force further easing. A dovish tilt could weigh heavily on the euro, particularly if U.S. CPI surprises to the upside.

Geopolitical Tensions Add Volatility to EUR/USD

EUR/USD has been sensitive to fresh geopolitical flashpoints. Reports that Poland shot down Russian drones near its border with Belarus triggered safe-haven demand for the dollar earlier in the week. At the same time, French politics remain a drag as President Macron nominated Lecornu as Prime Minister but continues to face a divided parliament, limiting fiscal maneuverability. Analysts warn that European policy paralysis could reduce the euro’s ability to withstand Trump’s tariff threats, with the U.S. president still pressing European allies to distance themselves from Russia. These factors keep the single currency capped even when U.S. data turns negative.

Technical Picture Highlights Key Battle Between 1.1660 and 1.1775

Technically, EUR/USD lost momentum after rejecting 1.1779 resistance, slipping back below its short-term uptrend line from late August. The pair is testing the 50-EMA at 1.1696, with stronger support at the 200-EMA around 1.1658. Sellers are targeting 1.1660, a level that coincides with the 200-day moving average and prior support zones. A break there exposes 1.1623 and potentially 1.1580, the July low. On the upside, buyers must reclaim 1.1743 to regain control, and a weekly close above 1.1775 would validate a run toward 1.1810–1.1880. Beyond that, the 1.2000 psychological barrier looms, aligned with the neckline of an inverse head-and-shoulders pattern forming on the daily chart. RSI at 44 signals weakening momentum, while MACD is flat, consistent with a neutral-to-bearish stance.