EUR/USD Price Forecast - Eur Slides Toward 1.16 as Fed Data Lift Dollar and ECB Weakness Weighs on Euro

EUR/USD Slides Toward 1.16 As Fed Strength And ECB Weakness Dominate The Tape

Spot Picture In EUR/USD: From 1.1810 Highs To 1.1630 With 1.1615–1.1618 Now In Play

EUR/USD trades around 1.1630–1.1656, sitting just above the recent one-month low zone at 1.1615–1.1618 and well below the late-December spike near 1.1808–1.1810. From that Christmas high, the pair has already dropped more than 1.6%, printing a clear sequence of lower highs and lower lows. Every attempt to push back above 1.1700 has been sold, confirming that the 1.1794–1.1813 band is now a hard cap rather than a staging point for another leg higher.

US Data And USD: 0.6% Retail Sales, 3.0% PPI YoY And DXY Around 99.20

The US side of EUR/USD is straightforward: the data support a firm USD. November Retail Sales rose 0.6% month-on-month, beating the 0.4% forecast and reversing October’s 0.1% decline. At the same time, the Producer Price Index climbed 3.0% year-on-year versus 2.8% previously and expectations of 2.7%, with core PPI also running at 3.0% after 2.9%. That combination—solid consumption and stickier wholesale inflation—keeps the Federal Reserve in a holding pattern rather than pivoting to cuts. The US Dollar Index (DXY) is trading near 99.15–99.20, pressing into 99.25–99.30 resistance with support around 99.00 and a rising trendline near 98.85. With DXY grinding higher inside that range, EUR/USD has no macro basis to reclaim 1.18 in the short term.

Fed Path Versus ECB: One Possible Cut In The US, Earlier Easing Risk In The Eurozone

Rates pricing now reflects a very different landscape than a few months ago. Late 2025 talk of two Fed cuts in 2026 has largely disappeared. After the December hawkish hold and a core inflation profile near 2.9% year-on-year, Fed funds futures assign roughly a 35% probability of just one cut by late Q4 2026. The message is: restrictive policy stays in place for longer. On the other side of EUR/USD, the Eurozone looks much softer. The flash manufacturing PMI at 48.5 signals contraction, and recent ECB rhetoric is far more dovish than the Fed’s stance. Markets see a high risk that the ECB cuts before the Fed. That policy divergence—stable or higher real yields in the US against a central bank in Europe preparing to ease—naturally points EUR/USD toward the low-1.16 / mid-1.15 area rather than back toward 1.18.

Fed Independence Risk Fades, Removing A Rare Tailwind For EUR/USD

Earlier in the week, EUR/USD briefly benefited from fears around Fed independence as political pressure on Chair Powell and a criminal investigation into the central bank’s renovation drove the USD lower. That support is gone. Trump has now stated he does not plan to fire Powell, even if he keeps the door open rhetorically. Global central bankers publicly backed the Fed, and the market narrative shifted from “institution under attack” to “Fed under scrutiny but still functioning.” Once that risk premium bled out of the dollar, the euro lost one of its few temporary props, leaving EUR/USD exposed again to the underlying macro divergence.

Eurozone Data: 0.7% Industrial Production MoM And 2.5% YoY Are Not Enough To Save EUR

On the European side, the latest numbers are respectable but not game-changing. Eurozone Industrial Production rose 0.7% month-on-month in November, beating the 0.5% consensus. Year-on-year, output accelerated from 2.0% to 2.5%, ahead of the 2.0% expected. The problem for EUR/USD is that a 0.7% monthly gain in factory output does not offset the policy gap versus a US economy posting 0.6% retail sales growth and 3.0% PPI. The market still treats the Eurozone as the weaker leg of the pair: sub-50 PMIs, a central bank leaning dovish, and less room to run restrictive policy. That is why EUR/USD cannot sustain levels above 1.1700 even when Eurozone data modestly beat expectations.

Options And Positioning: Skew Toward EUR Puts And Downside Volatility In EUR/USD

Derivatives pricing matches the spot trend. One-month implied volatility for EUR/USD is still low by historical standards, but risk reversals have turned sharply negative, reflecting growing demand for downside protection. Dealers show the most pronounced preference for EUR puts since late 2025, especially in maturities that capture the next Fed and ECB decision windows. Structures being favoured include long-dated EUR/USD puts with strikes around 1.1400 and volatility-focused plays like long strangles into March 2026. The profile is clear: the street is paying for insurance below 1.1600–1.1500 and is positioning for a break down rather than a squeeze back above 1.18.

Short-Term Technicals In EUR/USD: Descending Channel And Capped Rallies Below 1.1700

On the four-hour chart, EUR/USD trades near 1.1630–1.1635 inside a well-defined descending channel that started after the 1.1808 high. Price sits below the 50-period and 200-period EMAs, turning each rebound into a selling opportunity rather than a trend change. The RSI hovers around 38–40 and points lower, confirming a build-up in bearish momentum without yet reaching oversold conditions. The MACD is close to the zero line, which fits a controlled trend rather than a waterfall. Immediate support is at the January 9 low near 1.1615; beneath that, bears will target the 1.1600 round level and then the 1.1590 pocket tied to prior lows. On the upside, the first lid is 1.1660, followed by the channel top near 1.1690, and then 1.1700. As long as spot remains below 1.1700, the short-term technical bias stays firmly negative.

Medium-Term Levels In EUR/USD: 1.1691–1.1703 Pivot, 1.1590–1.1577 First Major Demand, 1.1490 Strategic Zone

On the daily timeframe, the structure is equally clear. The late-December surge topped with EUR/USD printing 1.1808, failing at the heavy 1.1794–1.1813 resistance that combines the 1.618% extension of the November advance and the 2025 high-day close. Since that rejection, the pullback has extended more than 1.6%, and the pair now trades within a descending pitchfork anchored on that high. The first critical pivot is 1.1691–1.1703, where a 38.2% retracement of the latest drop intersects with mid-December swing lows and the upper pitchfork boundary. A daily close above 1.1703 would be the first serious warning that the downtrend is fading. The next resistance band sits at 1.1735–1.1746, based on the 61.8% retracement and the yearly open, and then that same 1.1794–1.1813 cap.
On the downside, the initial structural level is the November high-day close at 1.1634, which price is currently testing. Below that lies the key demand cluster at 1.1590–1.1598, defined by the December low, the 100% extension of the late-December slide and the 61.8% retracement of the November rally. The 200-day moving average around 1.1577 runs just under this zone, reinforcing its importance. A breakdown through 1.1590–1.1577 would open the path to the 1.1492–1.1497 area, where the March 2020 and 2022 highs and the November low-day close converge. That 1.1490 region is the obvious medium-term destination for bears if the current trend continues.

Macro Calendar For EUR/USD: US Manufacturing, PCE, Fed Speakers Versus A Softer Eurozone Tape

The upcoming calendar continues to skew risk toward a stronger USD. The US will release the NY Empire State and Philadelphia Fed manufacturing surveys, alongside weekly Initial Jobless Claims, on top of the more important PCE inflation later in the month. Given 0.6% Retail Sales, 3.0% PPI, and earlier CPI data showing sticky prices, any upside surprise in PCE will harden expectations that Fed policy stays restrictive for longer, leaving little room for a dovish pivot.
Europe has already printed its better-looking numbers with Industrial Production at 0.7% MoM and 2.5% YoY. Yet even on that beat, EUR/USD is pinned below 1.1640 and cannot retest 1.1700. As long as Eurozone PMIs sit below 50 and the ECB leans toward earlier easing, incoming data are unlikely to flip the pair’s direction without a genuine negative shock to US growth or inflation.

Cross-Asset Backdrop: Risk Assets, Gold And The Dollar’s Role In EUR/USD Pricing

Across other markets, there is no broad panic that would organically weaken the USD. US indices are digesting rather than collapsing, gold has retreated from above $4,600, and crude oil is sliding after Trump signalled no immediate attack on Iran. The dollar’s strength is not being driven by blind risk aversion; it is being driven by relative growth, inflation and real yield advantages. That distinction matters for EUR/USD because it makes the downtrend more durable. A modest improvement in risk sentiment will not automatically rescue the euro if the underlying rate and growth spread remains skewed toward the US.

Trading Stance On EUR/USD: Bearish Bias, Rated Sell, With 1.1690–1.1746 As Short Zone And 1.1490 As Main Target

Putting all the pieces together—EUR/USD sliding from 1.1808 to 1.1630–1.1635, DXY anchored around 99.20, US Retail Sales at 0.6%, PPI at 3.0%, core inflation around 2.9%, markets pricing at best one Fed cut by late 2026, Eurozone PMI at 48.5, Industrial Production at 0.7% MoM / 2.5% YoY, options skew heavily favouring EUR puts, price trapped in a descending channel below 1.1700, and a support ladder at 1.1634, 1.1590–1.1598, 1.1577 and 1.1492–1.1497—the signal is unambiguous. The bias on EUR/USD is bearish, and the tactical stance is Sell.
Rallies into 1.1691–1.1703 are selling opportunities, with additional room up to 1.1735–1.1746 for higher-timeframe entries. A sustained daily break above 1.1746, and especially above 1.1794–1.1813, would invalidate this view. On the downside, the first objectives are 1.1615–1.1590, followed by a medium-term bear target in the 1.1490–1.1500 region. As long as the pair trades below 1.1700 and the Fed stays backed by strong data, the higher-probability trade remains short EUR/USD on strength rather than trying to call a bottom near 1.16.

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