EUR/USD Price Forecast - EURUSD Holds 1.18 as Lagarde and German CPI Put 1.1830 Breakout to the Test

EUR/USD: 1.18 Compression Setting Up For A Break Above 1.1830

Short-Term EUR/USD Structure Around 1.1790–1.1834

EUR/USD is locked in a narrow weekly band of roughly 70 pips, with the lower edge sitting around 1.1765–1.1778 and the upper edge capped in the 1.1830–1.1834 region. Spot has been rotating between 1.1790 and 1.1830, with the intraday high at 1.1830, which coincides with the 50% retracement of the recent swing and a clear intraday pivot. Price slipped below the 200-hour moving average at 1.1801 earlier, but demand reappeared close to the 100-hour moving average near 1.1793, turning 1.1790–1.1800 into a critical support belt. On the four-hour chart, the rally is stalling exactly at the 100-period simple moving average around 1.1830, which now acts as the main trigger level: a clean break and sustain above 1.1830 would expose 1.1860 first and 1.1889 next. Immediate support is set at 1.1790 and then 1.1760, the origin of the last recovery leg. A firm close below 1.1760 would neutralize the short-term rebound and push the focus back to 1.1741 and the 100-day moving average around 1.1691.

Momentum, Volatility And The 1.18 Pivot

Momentum indicators confirm a constructive but not overextended setup. On the four-hour frame, RSI sits near 56, a level that reflects improving positive momentum without being stretched, after recovering from oversold sub-30 conditions earlier in the month. MACD is slightly above its signal line with a modest positive histogram, pointing to a gradual handover from sellers to buyers rather than a blow-off squeeze. Volatility has compressed along with price, with the entire week contained in roughly 70 pips, which is unusually tight for this pair. Such compression around a pivot like 1.18 typically precedes a range expansion. As long as spot holds above 1.1790 and the 1.1765–1.1778 floor remains intact, the skew in this compression zone remains tilted to the upside rather than to a deep reversal.

Medium-Term EUR/USD Trend From The 1.08 Area To The 1.18 Zone

The current 1.1760–1.1830 congestion sits inside a wider uptrend that started when EUR/USD was trading around 1.08–1.09, with spot oscillating near 1.0850 between the 50-day and 200-day moving averages. Since then, the pair has carved a sequence of higher lows supported by moderating European inflation, changing expectations for the European Central Bank and a shrinking US rate advantage. The 100-day moving average at 1.1691 now marks the main medium-term line in the sand: as long as that level continues to hold on dips, the structure remains bullish. A sustained breakout above 1.1860 and then 1.1889 would confirm that the move off the 1.08 area is intact and that the market is willing to test the 1.19–1.20 band again.

ECB Inflation Trajectory And Its Impact On EUR Pricing

Euro area inflation has shifted from an emergency problem to a managed disinflation phase. Headline eurozone CPI has fallen from around 10.6 percent in late 2022 to near 2.4 percent by early 2025, while core inflation has eased from about 5.0 percent to roughly 2.1 percent. German projections for February 2025 point to headline CPI of about 2.3 percent year-over-year, down from 2.5 percent, and harmonised CPI near 2.4 percent, with core around 2.2 percent. Services inflation is still elevated at roughly 3.1 percent in Germany and about 3.3 percent in the bloc, while energy remains slightly negative. Against this backdrop, the ECB has held the deposit rate at 3.75 percent since September 2024 and is signalling that the hiking phase is over but that cuts will be data-dependent. Markets are pricing close to 75 basis points of ECB cuts for 2025 versus roughly 50 basis points for the Federal Reserve, a modest divergence that is not enough on its own to drive a deep EUR/USD sell-off, but still caps aggressive euro rallies when US data surprise on the upside.

German CPI As The Next Catalyst For EUR/USD

Germany remains the key inflation bellwether inside the eurozone because it accounts for roughly 29 percent of the bloc’s GDP. The market expects German CPI to print around 2.3 percent year-over-year, with harmonised CPI near 2.4 percent. Historically, when German CPI deviates by more than 0.2 percentage points from consensus, EUR/USD often reacts with 50–80-pip moves in the subsequent hours. A softer number, for example 2.1 percent instead of 2.3 percent, would increase expectations for earlier or larger ECB rate reductions and can pressure EUR/USD initially. If the release is interpreted as clean disinflation without growth damage, the medium-term effect can actually support the euro by lowering risk premia. A stronger-than-expected reading at 2.5 percent or higher would push back the timing of cuts, likely giving EUR/USD an immediate lift as rate spreads move in favour of the euro, but at the cost of raising concerns that policy might stay restrictive for too long and weigh on European growth later. With the pair now pinned just under 1.1830, this data point is well positioned to decide whether the 70-pip cage finally breaks.

Valuation Signals For EUR Versus USD

On longer-term purchasing power parity metrics, the euro remains undervalued versus the dollar even after the rebound from the lows of 2022–2023. That means the core question for policymakers and markets is not whether EUR is fundamentally too strong, but how quickly the exchange rate adjusts if the dollar weakens. A slow grind higher from 1.18 into higher ranges is manageable, consistent with inflation converging toward the ECB’s 2 percent target and with policy rates that are still restrictive in real terms. A sharp spike driven by an aggressive dollar sell-off, in contrast, would compress imported inflation faster than the ECB wants and could force officials to respond verbally or via the pace of cuts. For EUR/USD pricing, the undervaluation on PPP implies that medium-term dips into support zones like 1.1760–1.1740 and 1.1691 are likely to attract structural demand as long as euro area data do not deteriorate sharply.

Dollar-Side Dynamics And Risk-Off Behaviour

The dollar side of the pair no longer delivers a one-way story. Recent currency performance shows the USD only marginally firmer against GBP while slightly softer versus EUR, CHF, JPY, CAD, AUD and NZD on the day, with moves in the range of 0.05–0.25 percent. That pattern fits a currency that is losing some of its exceptionalism but still attracts flows during risk-off bursts or when US numbers surprise. When geopolitical stress or US beats on data emerge, EUR/USD can quickly slide back toward 1.1760–1.1740 as capital shifts into the dollar. But the absence of a sustained USD uptrend makes it hard to break the 1.1691 floor unless European growth or inflation data disappoint materially. In other words, short dollar episodes no longer need extreme narratives; they can unfold as the market slowly rebalances away from the peak-hike regime.

Market Positioning, Volatility And Key EUR/USD Levels

Price behaviour around 1.18 reflects balanced positioning. The market has repeatedly tested the upper band at 1.1830–1.1834 and failed, but without aggressive liquidation that would drag EUR/USD straight through 1.1760–1.1740. The lower band around 1.1765–1.1778 has been defended several times, and the double bottom at 1.1741 still stands, signalling real-money support on dips. Options markets show no extreme skew in implied volatility, consistent with a market that is cautious but not hedging for a one-sided breakdown. The technical map is straightforward. On the upside, 1.1830–1.1834 is the immediate trigger; a daily close above that region brings 1.1860 into play and then 1.1889, the broken 38.2 percent retracement of the 2026 trading range, with 1.1900 just beyond. On the downside, 1.1790 is the first defence, followed by 1.1760–1.1778 as the weekly floor, then 1.1741 as the double-bottom pivot and 1.1691 as the 100-day moving average and structural support.

Directional Stance On EUR/USD: Bias, Targets And Invalidation

Given the current structure, the macro backdrop and the technical levels, the bias remains bullish for EUR/USD at present levels rather than neutral or bearish. The preferred stance is long EUR/USD as long as price holds above 1.1760–1.1740, with upside targets at 1.1860 first and then 1.1889 and 1.1900. If momentum and incoming data cooperate, an extension toward the 1.20 zone becomes reasonable as a later objective. The invalidation point for this view sits at a daily close below 1.1741 followed by pressure on 1.1691; that sequence would break the pattern of higher lows, neutralize the current bullish setup and force a shift to a broader consolidation or a deeper corrective scenario. In the current state, with RSI near 56, MACD slightly positive and price leaning against 1.1830 resistance rather than collapsing away from it, the risk-reward still favours positioning for a breakout higher rather than betting on a failure of the 1.17–1.18 base.

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