EUR/USD Price Forecast - EUR/USD Climbs to 1.1580 as Dollar Slides and Markets Price 84% Fed Cut Odds

EUR/USD Price Forecast (EURUSD) Trades Near 1.1580 as Fed Cut Odds Hit 84%, Dollar Weakens, and Euro Tests Major Resistance

EUR/USD (EURUSD) is stabilizing near 1.1580, consolidating after a sharp three-session rally from 1.1420, driven by aggressive repricing in Federal Reserve rate expectations and improving risk sentiment in Europe. The pair has now reclaimed critical levels between 1.1550–1.1600, breaking above its descending channel for the first time since October. This marks a structural shift in momentum as markets assign 84% probability to a Fed rate cut in December, the highest this year, according to CME FedWatch data.

The euro’s strength is primarily supported by weakening U.S. data, with retail sales rising only 0.2% in September versus the 0.4% consensus, core PPI easing to 2.6% from 2.9%, and consumer confidence collapsing to 88.7, its weakest reading since May. These indicators collectively signaled a slowing U.S. economy and triggered broad pressure on the U.S. Dollar Index (DXY), which has fallen 0.6% over the past three days to trade near 103.1.

Technical positioning confirms a momentum shift. The pair now trades above its 20-day EMA at 1.157, while the 100-day EMA sits just below current price at 1.156, offering short-term support. The 50-day EMA at 1.160 represents the next key barrier, and the RSI at 57 indicates steady, controlled momentum rather than overextension. A decisive breakout above 1.1600 could open the door toward 1.1650 and 1.1710, levels corresponding to the 0.5 and 61.8 Fibonacci retracements from July highs.

Macro Pressure on USD: Weak Data, Yield Drop, and Political Transition

The U.S. 10-year Treasury yield fell below 4.02%, reinforcing market conviction that monetary policy is about to pivot. Reports suggest that Kevin Hassett, a known advocate for rate cuts, could replace Jerome Powell as Fed Chair in May — a political development that’s adding pressure to the greenback. The combination of deteriorating economic data and leadership uncertainty has triggered a significant sentiment shift in favor of the euro.

Markets are now positioning for two potential rate cuts in the first half of 2026, while the ECB maintains a stable stance. The Bundesbank’s Joachim Nagel confirmed ongoing inflation pressures in services but reiterated that policy would remain data-dependent, not preemptively dovish. This divergence between the Fed’s expected easing and the ECB’s cautious tone provides a structural tailwind to the euro through year-end.

ECB Stability Review and Lagarde’s Warning Temper Enthusiasm

Despite the technical breakout, the European Central Bank’s Financial Stability Review injected caution into the market. The ECB warned of “elevated risks to financial stability in Europe,” particularly from high sovereign debt levels in southern economies. These remarks capped the euro’s upside early Wednesday and kept price action limited below 1.1600. ECB President Christine Lagarde and board member Philip Lane are expected to comment further later this week, and traders are watching closely for any policy hints.

Nevertheless, EUR/USD continues to find buyers on dips. Improved geopolitical sentiment — particularly reports of progress in Russia-Ukraine peace discussions, with U.S. envoy Steve Witkoff expected to meet Vladimir Putin next week — has bolstered risk appetite. The market reaction has favored the euro, as a stable geopolitical backdrop reduces dollar demand for safety.

Technical Outlook: EUR/USD Builds Support Base and Faces 1.1600 Resistance

The EUR/USD daily structure has turned decisively constructive. The pair’s reclaim of 1.1480, the 23.6% Fibonacci retracement, confirmed a short-term reversal. A move above 1.1560 has placed the pair inside the 38.2% retracement zone, a pivot that has repeatedly defined direction over the last four months. Sustaining above 1.1600 would expose the 1.1650–1.1710 resistance range, while a failure to hold 1.1550 could send the pair back toward 1.1480, and below that, the 1.1420 long-term trendline support.

The MACD has crossed above zero for the first time in a month, confirming an improving bullish bias. Parabolic SAR points have flipped below price action, a pattern historically preceding 0.7% to 1% short-term advances. If buying momentum holds, the next bullish target zone aligns with 1.1670, where the October highs intersect the upper boundary of the descending channel.

Euro Fundamentals: Structural Support Amid Fiscal and Geopolitical Risk

European data has shown mixed signals but remains comparatively resilient. Industrial output in Germany improved 0.4% MoM, while eurozone PMIs remain below 50, reflecting mild contraction. However, rising real wage growth in core economies and moderating energy costs are offsetting the impact of slowing exports.

Political risk remains a mild headwind. Credit Agricole warned that French fiscal challenges could reemerge in late 2025, limiting euro upside into early 2026. Despite this, capital inflows into European equities and bonds have strengthened — net inflows reached €21.4 billion in October, the highest since 2021. This rotation has supported the euro by increasing demand for euro-denominated assets.

Dollar Side: Fed Cut Pricing and Yield Compression Drive the Shift

The most significant dynamic remains the U.S. side of the equation. Fed funds futures now fully price an 84% chance of a 25-bps December rate cut, with total 75 bps of easing expected by mid-2026. This rapid repricing has weakened the dollar across the board, with the Dollar Index dropping from 104.2 to 103.1 in less than a week.

Meanwhile, durable goods orders are forecast to rise just 0.3% in October, down sharply from 2.9% in September, while jobless claims are expected to tick up to 225,000 from 220,000 — further signs of a cooling labor market. This backdrop makes it difficult for USD buyers to sustain rallies.

Market Sentiment and Positioning

According to the CFTC, speculative net long positions in the euro have risen to 76,000 contracts, their highest since March 2024. Spot market volumes reflect similar sentiment: over $1.1 trillion in EUR/USD trades occurred over the past 24 hours, with a 59% buyer bias, indicating strong institutional interest around 1.1550–1.1600.

The Fear & Greed Index for currencies has climbed to 63, indicating moderate risk appetite. While this supports short-term euro strength, it also raises the probability of a pullback if U.S. data surprises to the upside.

Short-Term Scenarios and Key Price Levels

Immediate resistance lies at 1.1600–1.1625, a dense zone combining the 50-day EMA, the 38.2% retracement, and the descending channel’s upper boundary. Beyond this, the 1.1657 and 1.1710 levels mark the next test zones. On the downside, 1.1550 acts as the first pivot support, followed by 1.1500 and 1.1425, which correspond to prior swing lows.

A sustained break above 1.1600 with volume confirmation would trigger an accelerated move toward 1.1720, aligning with the 78.6% retracement from the July-to-October downtrend. In contrast, losing 1.1550 would reopen the 1.1480 zone and potentially a retest of 1.1420, where the pair previously found heavy institutional support.

Strategic View on EUR/USD (EURUSD)

The momentum clearly favors the euro in the short term. The technical and macro structure — falling U.S. yields, dovish Fed repricing, and improving European sentiment — supports continuation above 1.1600. However, the ECB’s warnings on sovereign debt and lingering French political risks may cap gains beyond 1.1720 unless supported by a confirmed Fed rate cut.

Institutional forecasts reflect this mixed but constructive bias. Danske Bank projects EUR/USD at 1.22 within 12 months, Morgan Stanley sees 1.23 by mid-2026, while Credit Agricole expects renewed pressure toward 1.14 next year due to eurozone fiscal headwinds.

In practical trading terms, bulls should monitor for confirmation above 1.1600, with upside targets at 1.1657 and 1.1710, while downside protection lies below 1.1550. Momentum traders may favor buy setups on pullbacks to 1.1550–1.1560 with stops below 1.1500.

Verdict: BUY / MODERATELY BULLISH
EUR/USD (EURUSD) maintains a constructive bias as Fed cut expectations dominate market psychology. Price remains technically supported and fundamentally underpinned by yield divergence. A decisive breakout above 1.1600 confirms bullish continuation toward 1.1720, while downside remains limited to the 1.1500–1.1420 range.

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