EUR/USD Price Forecast: Dollar Strength Returns as Pair Slips Back Toward 1.17–1.18

EUR/USD: Dollar Comeback Trade Is Back On

Dollar strength and the 97.94 pivot put EUR/USD under pressure

The US Dollar’s late-January collapse has been largely reversed. The DXY is back testing the 97.9–98.0 band, centered on the 97.94 Fibonacci level that has dictated price since April last year. That level acted as a floor after the early-2025 USD selloff, then flipped between resistance and support into December, and the first weeks of 2026 failed to break it decisively on the downside. Once oversold conditions in the Dollar unwound, EUR/USD gave back the squeeze above 1.20 and slid toward a one-month low. The pair now trades below the 1.18 handle, with upside capped and demand forced to defend the mid-1.17s rather than pushing for new highs.

EUR/USD key levels: 1.19 as ceiling, 1.17 as stress zone

On the daily chart, EUR/USD has respected a tight but meaningful structure. The 1.1909–1.1919 band has already rejected attempts to extend the January spike, defining the first serious ceiling. Sellers used that zone to re-enter, driving the pair lower. The first proper demand area sits at 1.1748, a long-term Fibonacci reference that has attracted dip-buyers and produced short bounces, but those rebounds have stalled around 1.1800–1.1805. If the market breaks under 1.1748 and cannot hold 1.1717, the next structural level sits near 1.1686. A daily close below that floor signals that the entire post-January USD washout is being reversed, opening room into the low-1.16s and potentially toward 1.15. On the topside, a sustained move through 1.1919 and then 1.2000 is required before anyone can argue that EUR is regaining the initiative. Until that happens, EUR/USD remains a downside-biased range inside 1.17–1.19.

US data: slow GDP, sticky inflation and why that still favors the Dollar

US macro prints delivered exactly the mix that keeps the Federal Reserve boxed in but still supports the Dollar against the euro. Fourth-quarter GDP slowed from around 4.4% to roughly 1.4% annualized, confirming that growth is cooling. At the same time, core PCE—the Fed’s preferred inflation gauge—is still sitting just above 3% year-on-year, with a 0.4% monthly gain. That is not a backdrop that allows the Fed to slash rates aggressively. Ten-year Treasury yields are holding around 4.08%. The dollar index is pinned near 97.7–97.9, not collapsing back into the lows. For EUR/USD, the message is clear. The US still offers a higher nominal and real rate profile. The eurozone does not bring a compelling growth or yield advantage that would justify a sustained premium. As long as the market prices only two 25 bp cuts for 2026 and US yields stay near 4%, the carry and rate differential continue to lean in favor of the Dollar side of the cross.

Tariffs, Supreme Court ruling and why trade policy is still euro-negative

The Supreme Court decision that struck down the previous emergency-based global tariff architecture removed a key legal pillar of the last US administration’s trade strategy, but it did not remove the protectionist impulse. The White House quickly pivoted to a new framework: a 10% global tariff under Section 122 layered on top of other Section 232 and 301 measures. Treasury estimates suggest 2026 tariff revenue will be “little changed” if that one-for-one structure is implemented, which means global trade friction is not disappearing, only being repackaged. Fed officials have already hinted that, if the scheme is effectively neutral for overall revenue, the headline macro hit may be limited, but corporate cost and planning uncertainty stay high. For EUR/USD, this setup is not friendly. The euro area is more trade-dependent and more exposed to global manufacturing and export cycles than the US. A durable tariff regime tends to hit Europe relatively harder, especially when US domestic demand and fiscal policy remain more supportive. The legal wrapper around tariffs changed; the underlying bias toward protectionism did not, and that still leans against the euro.

Geopolitics, safe havens and how EUR behaves in risk-off mode

Escalating tension in the Middle East and the risk of US strikes on Iranian targets have added another layer of risk premium. Classic “risk-off” flows are visible: gold has ripped back above $5,000 per ounce and is probing the $5,100 area after a flush to roughly $4,860; US Treasuries attract demand on dips; the Dollar holds firm even when it pulls back intraday. In this environment, EUR/USD usually trades like a pro-cyclical asset. The euro is tied to global trade, bank balance sheets and cyclical sectors, while the Dollar and gold act as primary hedges. That pattern is in play again. Geopolitical headlines slam equity sentiment, gold catches a bid, the DXY firms, and EUR/USD is pushed toward the lower edge of its range. Unless tensions decline meaningfully or the eurozone produces a positive growth surprise, the risk premium structure continues to favor long USD versus EUR.

Why USD/JPY and yen carry still dictate part of the EUR/USD story

The yen remains the hidden driver behind a significant portion of the DXY move. Over a five-year horizon, JPY is still heavily devalued against USD, EUR and GBP. When the carry trade in JPY was hit in late January, USD/JPY collapsed and dragged the DXY lower. EUR/USD spiked above 1.20 and went overbought on the daily chart even though euro-specific fundamentals did not justify that sort of rally. That squeeze has been unwound. USD/JPY has reclaimed ground back toward 155.00 after a volatile reaction to Japanese political headlines and strong US numbers. As long as Japanese rates remain pinned near zero and the authorities tolerate a weak yen, the structural carry trade stays in place and the DXY retains support. That caps EUR/USD rallies even when eurozone data marginally improve. If at some point intervention or a genuine BoJ policy shift forces USD/JPY down toward 150.00 or below, you will see that shock propagate into EUR/USD upside. Right now, that is not the base case.

Positioning and sentiment: the euro is still a passenger on USD flows

The last twelve months have made one point obvious: EUR/USD often rides the Dollar wave rather than steering it. July 2024 was a textbook example. A BoJ-linked event smashed USD/JPY lower, DXY fell, and EUR/USD rallied toward 1.1212 despite soft eurozone data. The recent episode is the mirror image. The Dollar became the most oversold in more than five years on the daily chart in late January, EUR/USD overshot above 1.20, and now the unwind of that stretched positioning is sending the pair back toward its fundamental range. FXStreet’s weekly view has EUR/USD trading near a one-month low with a heavier bearish tone as US data complicate the Fed’s easing path and geopolitical risks rise. The market still prices around two Fed cuts this year, but the odds of an early-cycle cut have shrunk after the latest GDP and PCE prints. At the same time, the ECB faces a weaker growth backdrop and cannot credibly out-hawk the Fed. Speculative accounts have little reason to build aggressive euro longs while this asymmetry persists.

Trading map for EUR/USD: ranges, triggers and risk zones

Price has now defined a clear tactical map for EUR/USD. On the upside, 1.1800–1.1810 is the first intraday friction area, followed by the more important 1.1909–1.1919 band and then the psychological 1.2000 handle. On the downside, 1.1748 is the first support that matters; a break there puts 1.1717 in play, and a failure to hold that region opens 1.1686, the deeper structural floor from the prior cycle. As long as EUR/USD trades below 1.1919 and cannot print a convincing daily close above 1.2000, every bounce looks like a corrective squeeze inside a larger Dollar-supportive regime. A weekly close above 1.2000 would be the first real sign that the oversold Dollar conditions are not fully resolved and that the tariff and geopolitics shocks have been absorbed. A clean break below 1.1686 with confirmation from broader risk-off and strong USD data would mark the start of a new bearish leg rather than a simple normalization.

Bias and verdict on EUR/USD: Sell rallies, not a Buy or Hold

With US GDP slowing to around 1.4% but core PCE still north of 3%, ten-year yields orbiting 4.1%, the DXY anchored near the 97.9 pivot, trade tensions reshaped rather than removed, and geopolitical risk elevated, the balance of forces still favors the Dollar side of EUR/USD. The euro does not offer a compelling rate or growth advantage, and the pair has already rejected resistance around 1.19. The clean trade remains the same: EUR/USD is a Sell on rallies, not a Buy and not a neutral Hold at current levels. Short setups into the 1.1800–1.1919 zone, with downside focus on 1.1748 first and then 1.1717–1.1686, align with both macro and technical conditions. Only a sustained break above 1.2000 combined with a visible shift in the Fed-ECB rate narrative justifies upgrading the stance away from that bearish bias.

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