EUR/USD Price Forecast: Euro Holds Near 1.18 as Weak USD Keeps 1.19 in Play

EUR/USD Macro Setup: Euro Holds Near $1.18 as USD Weakens

Key EUR/USD Trading Zone and Immediate Context

EUR/USD is trading around 1.1770–1.1780, less than 30 pips below the recent two-month high at 1.1804. Price is sitting in the upper half of an ascending channel that has guided the pair higher since late November, with a clear pattern of higher highs and higher lows on both the 4H and daily charts. On the daily timeframe, the 14-day RSI is hovering just below 70, signaling strong demand for the EUR against the USD, but also flagging the risk of short-term overbought conditions around the 1.18 handle. Despite a firmer US Q3 GDP print at 4.3% versus 3.3% expected, the USD recovery has been shallow, leaving the underlying trend tilted in favor of the Euro while the dollar remains on the back foot.

ECB Policy at 2.0%: Why It Supports the EUR Side of EUR/USD

On the European side, the ECB continues to anchor the policy rate at 2.0%, a level maintained since June. Updated projections show slightly higher expectations for growth and inflation, which reduces the pressure for further easing and helps to underpin the EUR. Markets now assume that the ECB will likely hold rates steady into mid-2026, effectively providing a stable yield floor for the Euro. President Christine Lagarde’s cautious tone acknowledges ongoing uncertainty but avoids committing to fresh cuts. That restraint is being interpreted as confirmation that the easing cycle is near completion, which supports EUR/USD on dips as investors position for a relatively steady EUR against a USD that is already well into an easing phase.

Fed Easing and the USD: How Rate Cuts Undermine the Dollar

The Federal Reserve has already delivered 75 bps of cuts earlier in 2025 and followed with an additional 25 bps in December, bringing the federal funds range to roughly 3.50%–3.75%. Official guidance via the dot plot points to only one more cut in 2026, but futures markets disagree and are pricing two or more additional cuts over the next year. Fed officials are split: some, like regional presidents, argue policy can pause here to assess the impact of earlier moves; others warn that holding restrictive settings for too long could re-create downside risks later. The result is a US Dollar Index (DXY) drifting lower within a pronounced descending channel, recently testing the 97.70–98.10 zone. For EUR/USD, that backdrop converts every short-term dollar bounce into a selling opportunity, reinforcing Euro strength as long as the Fed path remains more dovish than the ECB path.

Technical Structure of EUR/USD: Channel, EMAs and the 1.1800–1.1918 Cap

Technically, EUR/USD trades firmly within an ascending channel on the 4H chart, with price oscillating between rising support near 1.1720 and resistance just above 1.1800. Immediate resistance is clustered around the 1.1800–1.1804 band, where a psychological barrier overlaps with the recent two-month peak from December 16. A sustained daily close above that zone would open the way toward the upper boundary of the channel around 1.1870, followed by a larger resistance reference at 1.1918, the highest level since June 2021. On the downside, the first key support is the 9-day EMA around 1.1730–1.1731, with the channel floor just below at 1.1720. Deeper support sits at the 50-day EMA near 1.1650–1.1653, and then the 1.1589 low from December 1 as the level that would seriously challenge the current bullish structure if broken. As long as the pair holds above 1.1730, the technical profile remains clearly constructive.

Momentum Signals for EUR/USD: RSI, Trend Quality and Overbought Risk

Momentum indicators confirm a bullish bias but warn against complacency. On the 4H chart, EUR/USD trades with the RSI near 60, signaling healthy upside momentum without extreme stretch, while the daily RSI sits closer to 69, right at the edge of overbought. Price remains firmly above both the 9-day EMA and the 50-day EMA, with the shorter average leading the longer one and both sloping higher. That configuration confirms a strong trend rather than a random spike. However, the proximity of RSI to the overbought threshold means a sharp intraday rejection from 1.1800–1.1810 cannot be ruled out, especially in thin year-end liquidity. Temporary pullbacks toward 1.1730–1.1700 would be consistent with a healthy trend rather than a top, as long as the pair does not close decisively below the 1.1650 region on a daily basis.

Cross-Market Context: Why the EUR Is Leading Against the USD

The intraday FX performance map shows the EUR as one of the stronger currencies against the USD, with the Euro up around 0.19% versus the dollar. The dollar is softer across much of the G10 complex, while moves among GBP, CHF, JPY, and commodity currencies are more mixed against each other. That profile signals that the current move is not merely generic risk-on weakness in the USD, but specifically a rates and policy divergence story between the Eurozone and the United States. With EUR/USD trading near 1.1770–1.1780 and the DXY sliding below 98, capital is rotating away from the dollar toward currencies backed by stable or less-dovish central banks, and the EUR fits that profile as long as the ECB holds its line at 2.0% and avoids signaling a renewed easing cycle.

Impact of US Data on EUR/USD: Strong GDP, Soft Dollar

The US Q3 GDP surprise at 4.3% versus 3.3% expected delivered a temporary lift to the USD, but the move faded quickly as traders reverted to the broader macro narrative. Solid growth confirms that the US economy is not in recession, but with inflation cooling and policy rates already down from their peak, the market views stronger data as a reason for a gradual, controlled easing cycle, not a renewed tightening phase. That distinction is critical for EUR/USD: robust GDP does not automatically translate into a stronger dollar when the Fed has already pivoted and the market expects further cuts. Instead, strong data tends to slow the pace of dollar selling rather than reverse the trend. For now, that dynamic justifies consolidation below 1.1800–1.1810 rather than a deep reversal toward 1.16, but it also prevents an unchecked Euro melt-up beyond 1.19 without fresh catalysts.

Trading Levels and Strategy View for EUR/USD: Where the Risk-Reward Favors the Euro

From a trading standpoint, the structure around EUR/USD supports a buy-on-dips approach rather than aggressive top-picking. The preferred accumulation zone sits in the 1.1710–1.1735 area, where the 9-day EMA, mid-channel support on the 4H chart, and short-term swing lows cluster together. As long as the pair holds above 1.1700–1.1705 on a closing basis, the upside bias remains intact, with initial targets centered on a clean break of the 1.1800–1.1805 resistance band. Beyond that, upside extensions toward 1.1860, and then 1.1870–1.1918, come into play as the logical next objectives within the current channel. On the risk side, a decisive daily close below 1.1700 would challenge the bullish bias, and a drop beneath the 50-day EMA near 1.1650 would downgrade the view to neutral, exposing 1.1589 as the next downside test. Until those lower levels are breached, the risk-reward profile favors maintaining a constructive stance on the Euro against the dollar.

Bias and Verdict on EUR/USD: Buy, Sell or Hold at 1.17–1.18?

Combining the macro drivers and technical structure, the current EUR/USD configuration supports a bullish bias with a Buy stance while the pair trades above 1.1700–1.1730. The ECB at 2.0%, the Fed already easing toward 3.50%–3.75%, a DXY sliding toward 97.70–98.10, and price action clustered just under 1.1800 inside an ascending channel all point in the same direction: dips are opportunities to add Euro exposure rather than reasons to flip bearish on the pair. Only a sustained break below 1.1650 would justify moving to a Hold or neutral view and preparing for a deeper correction toward 1.1589. As it stands, with EUR/USD holding the 1.17–1.18 zone, the pair remains a Buy with an upside path toward 1.1860–1.1918, as long as the policy and momentum backdrop does not materially shift in favor of the USD.

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