EUR/USD seems to be giving some signs of life following last week’s yearly lows near 1.1400 the figure. In the meantime, while below its critical 200-day Simple Moving Average (SMA) around 1.1670, the pair risks deeper losses in the short-term horizon.
EUR/USD rapidly forgets about Wednesday’s strong decline and manages to regain composure and advance to fresh weekly tops well north of the 1.1500 yardstick on Thursday.
The robust bounce in the pair comes amid the resurgence of an intense selling pressure on the US Dollar (USD), which is dragging the US Dollar Index (DXY) to new five-day troughs near 99.30.
Fed: steady policy, higher for longer bias
The Fed kept rates unchanged at 3.50%–3.75%, fully in line with expectations, but the tone leaned slightly more hawkish than the headline suggests.
The backdrop remains broadly unchanged. Growth is holding up, the labour market is steady, and inflation is still described as somewhat elevated, with uncertainty lingering, particularly around the Middle East.
The real signal came from the projections. Inflation for 2026 was revised higher, and the longer-run rate edged up, pointing to more persistent price pressures. The rate path still implies only limited easing, with a clear internal split; some officials see no cuts in 2026, and one even sees rates rising into 2027.
The message is straightforward: the Fed is in no rush, and the bar for cuts remains high.
Powell reinforced that stance. The economy is still expanding on solid consumption and productivity, while the labour market is cooling only gradually. Inflation progress has stalled, with energy and tariffs complicating the picture.
Policy is seen as close to neutral or slightly restrictive, with no appetite for further tightening, but equally no urgency to ease. The Fed remains firmly data dependent and in wait and see mode.
ECB: cautious, but not comfortable
The ECB left all three key rates unchanged, with the deposit rate at 2.00%, but the tone was one of controlled caution.
The Middle East conflict has shifted the risk balance, lifting inflation risks while weighing on growth. That tension framed the entire meeting.
Projections were revised higher for inflation, especially into 2026, while growth remains modest. The ECB also incorporated more recent data and highlighted downside growth and upside inflation risks via scenario analysis tied to energy disruption.
Lagarde struck a calm but deliberate tone. The ECB is “well positioned”, not comfortable. Energy is set to push inflation above 2% in the near term, with second-round effects under close watch, even as underlying inflation and wages show some moderation.
EUR positioning: still long, losing conviction
Latest Commodity Futures Trading Commission (CFTC) data show a shift in sentiment.
Net longs were trimmed to around 105.1K contracts, while open interest rose to roughly 969.4K.
This suggests adjustment rather than exit. Positioning remains net long EUR, but conviction is clearly fading.
What’s on the horizon?
Near term: the EUR/USD pair is still largely influenced by the US Dollar. Traders are keeping a close eye on geopolitical uncertainties and trade disputes. The upcoming preliminary Purchasing Managers’ Index (PMI) reports from both the Eurozone and the US are the next significant events to watch.
Risks: Any further deterioration in the Middle East could prompt investors to seek the safety of the US Dollar. From a technical perspective, if the EUR/USD stays below the 200-day Simple Moving Average (SMA), the risks of a downward move would increase.
Technical landscape
In the daily chart, EUR/USD trades at 1.1560. The near-term bias is mildly bearish as spot holds below the clustered 55- and 100-day Simple Moving Averages (SMAs) near 1.17 while trading only marginally under the 200-day SMA around 1.17, indicating waning upside momentum within a broader, still-balanced backdrop. The Relative Strength Index (RSI) has recovered toward the mid-40s from oversold territory, suggesting sellers retain an advantage but with reduced downside momentum. Meanwhile, the rising Average Directional Index (ADX) above 38 points to a strengthening trend, aligning with the recent sequence of lower closes and favoring a downside continuation while below the nearby moving averages.
Immediate resistance stands at 1.1578, where a horizontal barrier aligns just under the 200-day SMA, followed by 1.1766, which coincides with the 55-day SMA region and marks a more decisive pivot for a bullish reassessment on a daily close above it. On the downside, initial support emerges at 1.1491, ahead of 1.1469, with a break of this band exposing the lower support at 1.1392. As long as the pair trades beneath 1.1578, sellers are expected to fade recoveries into resistance, while a sustained move under 1.1491 would open the path toward a deeper retracement within the current bearish phase.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line: USD firmly in control
For now, EUR/USD is being driven far more by Washington than Frankfurt.
Until there is clearer guidance on the Fed’s path or a more convincing euro area recovery, upside remains limited.
The US Dollar stays in charge.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
