EUR/USD Price Forecast - Euro to Dollar Slides to 1.162 as Powell’s Hawkish Fed and Weak Eurozone Data Sink the Euro

EUR/USD (Euro to U.S. Dollar) Tests 1.162 Support as Fed Cut, ECB Caution, and Trade Truce Reshape Outlook

The EUR/USD pair trades near 1.1620, down 0.35% intraday, as volatility spikes after the Federal Reserve’s 25-basis-point rate cut and weak Eurozone data. The Fed lowered its benchmark range to 4.00%, but Chair Jerome Powell’s warning that inflation progress “is not yet guaranteed” fueled a broad U.S. dollar rally, driving the Dollar Index (DXY) to 99.21, its highest since August. Meanwhile, the ECB’s cautious tone and flat Eurozone GDP readings have left the euro vulnerable, with traders eyeing 1.1540–1.1560 as the next critical support zone.

Fed Cut Sparks Dollar Surge, Weighing on EUR/USD

Despite the rate cut, Powell’s comments signaled hesitation for future easing, crushing market optimism. Traders slashed December cut odds to 70% from 90%, reinforcing the dollar’s strength. As a result, EUR/USD extended its decline below 1.1640, erasing early gains. The DXY gained nearly 0.6%, while U.S. Treasury yields steadied around 4.18%, maintaining upward pressure on the greenback. The hawkish tone shifted sentiment sharply, with risk assets pulling back and gold also losing its footing near $3,972.

Eurozone Data: Flat Growth and Soft Inflation Deepen Pressure

Europe’s macro picture offered no relief. Germany’s GDP stagnated at 0.0%, narrowly avoiding contraction, while German CPI rose 0.2% and Spanish inflation eased to 2.9%. Combined with the ECB’s deposit rate hold at 2.00%, this confirmed an economy struggling to regain momentum. ECB President Christine Lagarde warned that inflation risks persist but stressed that “growth conditions remain fragile.” The euro’s limited yield advantage versus the dollar continues to suppress demand, pushing EUR/USD toward its lowest levels since early October.

Technical Breakdown: 1.1620 Key Pivot, 1.1540 Target in Focus

Technically, EUR/USD faces strong rejection near 1.1640, aligning with the 200-period EMA at 1.1642, which has capped all recent rebound attempts. The 50-period EMA at 1.1620 now serves as intraday resistance, while the RSI at 45 reflects fading buying momentum. A confirmed break below 1.1580 would expose 1.1545, the October low. The Fibonacci retracement at 0.236 (1.1628) is pivotal — a close beneath it could accelerate selling toward the 1.15 handle. Conversely, a recovery above 1.1659 may trigger short covering toward 1.1700–1.1770, matching the 0.618 retracement of the October downtrend.

Trump–Xi Trade Truce Offers Temporary Relief to Risk Sentiment

The Trump–Xi meeting in South Korea briefly lifted global markets after the U.S. cut tariffs on Chinese imports from 57% to 47%, and China delayed export controls by a year. EUR/USD rebounded to 1.1635 before retracing as monetary divergence overshadowed trade optimism. The event eased geopolitical risk but failed to offset the macro headwinds dominating the euro’s performance. Traders now await Eurozone Core CPI (2.3% forecast) and U.S. Nonfarm Payrolls as the next volatility triggers.

DXY Momentum and Yield Advantage Keep Dollar in Control

The U.S. Dollar Index (DXY) trades around 99.13–99.21, above both the 50-day EMA (98.89) and 200-day EMA (98.71), signaling firm bullish control. The RSI near 59 reflects healthy demand without overbought pressure. A sustained move above 99.21 could open the path toward 99.47–99.78, reinforcing the bearish tilt in EUR/USD. With U.S. 10-year yields holding near 4.18%, dollar support remains structural rather than speculative.

Futures Positioning: CFTC Data Shows Rapid Long Unwinding

Recent CFTC data reveals euro net longs fell 18% week-on-week, showing reduced confidence among large speculators. Hedge funds appear to be trimming exposure ahead of inflation data and the next ECB meeting. This decline in positioning supports a test of 1.1540 if EUR/USD fails to reclaim 1.1650. Still, the reduction in leverage also limits downside acceleration — meaning a short squeeze could emerge on weaker U.S. data or dovish ECB communication.

Cross-Market Signals: GBP/USD and USD/JPY Reinforce Divergence

The GBP/USD pair trades at 1.3200, hovering near multi-month lows, while USD/JPY has surged above 150.90, confirming sustained demand for the dollar across the FX board. This reinforces the global policy divergence narrative — a hawkish Fed versus a cautious ECB and BoE. The euro’s underperformance mirrors these broader dollar inflows, with traders preferring high-yield and dollar-denominated assets.

Volatility Outlook and Key Levels to Watch

The Euro Volatility Index (EVIX) has risen 11% this week, highlighting elevated hedging activity ahead of Friday’s data. For EUR/USD, the 1.1620 zone remains the key battleground. Holding above it could stabilize the pair into the 1.1700–1.1770 range, while failure risks a sharp slide toward 1.1540–1.1500. Macro catalysts — from inflation readings to U.S. payrolls — will determine whether this support holds or breaks. The bias remains bearish, but oversold conditions suggest scope for a short-term rebound if the dollar pauses its advance.

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