What to Know
- EUR/USD traded at 1.1152 after wavering around the Federal Reserve’s October interest rate decision.
- The Federal Reserve left interest rates unchanged between 3.75% and 4%, while two officials voted to hike rates.
- Governor Kevin Warsh maintained that US inflation was too high, reinforcing speculation about another rate increase at the last meeting of the year.
- Traders are awaiting US macro data, including Personal Consumption Expenditure inflation, GDP figures and initial jobless claims.
- Economists expect headline and core Personal Consumption Expenditure inflation to remain above 2% in September.
- The European Central Bank decision is the next major catalyst for EUR/USD, with economists expecting rates to remain unchanged at 2.65% and the deposit facility rate at 2.50%.
- The pair recently traded only a few points above this month’s low of 1.1111.
- Technical traders are monitoring a potential double-bottom pattern, with 1.1230 viewed as a possible rebound target if bullish momentum improves.
- A bearish scenario would focus on a move toward 1.100 if sellers regain pressure.
EUR/USD Holds Above 1.1111 as Policy Uncertainty Builds
EUR/USD remained under pressure after the Federal Reserve chose to keep interest rates unchanged at its October meeting, leaving the pair caught between competing policy expectations in the United States and the euro area. The exchange rate was trading at 1.1152, sitting only a short distance above this month’s low of 1.1111, as traders avoided aggressive positioning before a dense run of macroeconomic events.
The pair’s hesitation reflects a market still trying to price the next stage of the interest rate cycle. The Federal Reserve held rates between 3.75% and 4%, but the decision was not entirely dovish because two officials voted to hike rates. That split matters for EUR/USD because it suggests policymakers remain divided on how restrictive policy needs to be while inflation remains a concern.
Governor Kevin Warsh maintained that US inflation was too high, a message that kept the dollar supported and limited the euro’s ability to mount a cleaner recovery. Market participants, including Goldman Sachs analysts, expect that the Federal Reserve could hike rates at the last meeting of the year. Polymarket odds also show that most traders expect a December hike, keeping rate differentials firmly in focus for currency markets.
US Inflation, GDP and Jobless Claims Move Into Focus
The next phase for EUR/USD will depend heavily on incoming US economic data. Traders are watching the Personal Consumption Expenditure inflation figures because that gauge carries substantial weight in Federal Reserve policy discussions. Economists expect both headline and core Personal Consumption Expenditure inflation to have remained above 2% in September, which would reinforce the argument that the central bank may need to keep policy tight.
Inflation data that stays elevated tends to support the US dollar because it raises the probability of higher interest rates or a longer period of restrictive monetary policy. For EUR/USD, that dynamic can make rallies harder to sustain unless euro-area expectations improve at the same time. The pair’s muted reaction after the Fed decision shows that traders are waiting for confirmation rather than relying on one event alone.
GDP figures and initial jobless claims will add another layer to the outlook. Strong activity data can support the view that the US economy has enough momentum to absorb higher rates, while softer labor-market signals may complicate that argument. In the current environment, EUR/USD is likely to remain sensitive to any data that changes expectations for the Federal Reserve’s final policy meeting of the year.
ECB Decision Becomes the Main Euro Catalyst
The most important near-term catalyst for the euro side of the equation is the European Central Bank interest rate decision. Economists expect the central bank to leave interest rates unchanged at 2.65%, with the deposit facility rate at 2.50%. If that expectation is met, attention will quickly turn to the tone of the policy statement and any guidance on whether officials see room for another hike later this year.
Like the Federal Reserve, analysts believe the European Central Bank has room to hike rates later this year. However, the euro-area backdrop is complicated. Some key European countries are facing challenges, while bond yields in Spain and France have climbed to the highest level in years. Rising bond yields can tighten financial conditions and increase pressure on policymakers to balance inflation control against market stress and growth concerns.
For EUR/USD, this makes the European Central Bank meeting more than a simple rate announcement. A message that keeps the door open to tighter policy could support the euro, especially if US data fails to strengthen the dollar further. Conversely, a cautious tone that highlights financial-market stress or economic weakness could leave the euro vulnerable, particularly with the pair already trading close to its monthly low.
Technical Traders Watch a Double-Bottom Setup
On the daily chart, EUR/USD has continued falling this month and has traded well below the 50-day moving average. That position reflects a bearish broader trend, with sellers having controlled much of the recent price action. The pair has also remained at the extreme oversold level of the Murrey Math Lines tool, a condition that can sometimes precede stabilization or a corrective rebound if selling pressure begins to fade.
The constructive element for euro bulls is the potential formation of a double-bottom pattern near 1.1111. A double bottom is a reversal pattern watched by technical traders when price tests a support zone twice and fails to break meaningfully lower. It does not guarantee a rally, but it often attracts attention because it can signal that sellers are struggling to extend the downtrend.
The neckline of this potential formation sits at the Ultimate Support level of the Murrey Math Lines tool. If EUR/USD confirms the setup with stronger buying interest, the pair could rebound toward 1.1230. That level has become a key bullish target for traders looking at a near-term recovery scenario over a timeline of 1 to 2 days.
Still, the bearish view remains relevant because the pair has not yet invalidated the broader downward bias. A move lower could bring 1.100 back into focus, particularly if US inflation data is firm, GDP remains resilient, or the European Central Bank delivers a cautious message. In that scenario, the upside reference at 1.1230 would operate as a key risk level for bearish positioning.
Trading Scenarios for the Next 1 to 2 Days
For bullish traders, the immediate setup centers on whether EUR/USD can hold above the 1.1111 area and build enough momentum to challenge 1.1230. A bullish view would involve buying the pair with a take-profit at 1.1230 and a stop-loss at 1.100. That approach depends on the idea that the possible double-bottom pattern will attract follow-through demand and that upcoming policy signals will not meaningfully strengthen the dollar.
For bearish traders, the focus is on renewed downside pressure if the pair fails to sustain its rebound attempt. A bearish view would involve selling EUR/USD with a take-profit at 1.100 and a stop-loss at 1.1230. This scenario would be more likely if the Federal Reserve outlook remains hawkish, US data reinforces expectations for another hike, or the European Central Bank fails to provide enough support for the euro.
The distance between these levels highlights the importance of the next macro catalysts. EUR/USD is not moving in isolation; it is being shaped by relative interest rate expectations, inflation persistence, growth signals and bond-market stress in Europe. That combination can produce sharp short-term swings, especially when major data releases and central bank decisions cluster closely together.
Why the Fed and ECB Policy Gap Matters
Currency pairs often move on the difference between expected returns in two economies. When traders believe the Federal Reserve may raise rates while the European Central Bank remains cautious, the dollar can gain an advantage against the euro. If traders believe the European Central Bank can also tighten policy later this year, that advantage may narrow and give EUR/USD room to recover.
The present setup is finely balanced because neither central bank is presenting a simple path. The Federal Reserve left rates unchanged, but dissenting votes and comments about high inflation preserved the possibility of another hike. The European Central Bank is expected to remain on hold, but analysts still see room for a later move. This leaves EUR/USD highly exposed to shifts in language, data and market expectations.
Bond-market developments in Europe add another complication. Higher yields in countries such as Spain and France can reflect tighter financial conditions and investor concerns. If those conditions become more difficult, the European Central Bank may face a more delicate task when communicating its policy outlook. That uncertainty could limit euro upside even if technical signals suggest the pair is oversold.
EUR/USD Outlook Remains Data Dependent
The near-term outlook for EUR/USD is best described as cautiously balanced with a technical rebound risk. The pair is oversold by one technical measure and may be forming a double bottom near 1.1111, which gives bulls a clear argument for a move toward 1.1230. However, the pair remains below the 50-day moving average and has been falling this month, so sellers still retain a meaningful trend advantage.
In practical terms, traders are likely to treat 1.1111 as an important support reference and 1.1230 as the key near-term upside level. A break above the latter would strengthen the recovery case, while a loss of the former would increase attention on 1.100. Until the US data and European Central Bank decision are absorbed, EUR/USD may continue to move unevenly between technical support and macro-driven resistance.
FXCOINZ will continue to monitor how the pair reacts to the policy backdrop, especially if inflation expectations, GDP figures, jobless claims or European bond-market pressures shift the balance between the euro and the dollar. For now, the market is watching whether the potential double-bottom formation can survive the next wave of central bank and economic data risk.
Frequently Asked Questions (FAQs)
What is driving EUR/USD right now?
EUR/USD is being driven by Federal Reserve policy expectations, the upcoming European Central Bank decision and US macro data, including Personal Consumption Expenditure inflation, GDP figures and initial jobless claims.
Where is EUR/USD trading?
EUR/USD was trading at 1.1152 after wavering following the Federal Reserve’s October decision, staying only a few points above this month’s low of 1.1111.
What did the Federal Reserve do at its October meeting?
The Federal Reserve left interest rates unchanged between 3.75% and 4%, although two officials voted to hike rates, keeping the policy outlook hawkish enough to support the dollar.
Why is the European Central Bank decision important for EUR/USD?
The European Central Bank decision is important because economists expect rates to remain unchanged at 2.65% and the deposit facility rate at 2.50%, while traders will look for guidance on whether the bank has room to hike later this year.
What is the bullish EUR/USD technical setup?
Some technical traders are watching a potential double-bottom pattern near 1.1111. If buying momentum improves, the pair could rebound toward 1.1230 over a 1 to 2 day timeline.
What is the bearish EUR/USD scenario?
The bearish scenario focuses on selling pressure returning and pushing EUR/USD toward 1.100, with 1.1230 acting as the stop-loss reference for that view.
Why does US PCE inflation matter for the pair?
Personal Consumption Expenditure inflation matters because economists expect headline and core readings to remain above 2% in September, which could influence expectations for another Federal Reserve rate hike.
What role do European bond yields play?
Rising bond yields in key countries such as Spain and France create challenges for European policymakers and may affect how aggressively the European Central Bank can communicate future tightening.
Is EUR/USD in a confirmed uptrend?
No. While a double-bottom pattern may point to rebound potential, EUR/USD has continued falling this month and remains much lower than the 50-day moving average, so the broader trend still requires caution.