EUR/USD Price Forecast - EUR to USD Struggles at 1.1800 After Fed Cut, Eyes on PCE and GDP

EUR/USD Struggles Near 1.1860 as Fed Cut Sparks Volatility

The euro-dollar pair opened the week near 1.1730 and rallied quickly into the 1.1920 region before fading. The Federal Reserve’s 25 basis-point cut, taking the federal funds rate to 4.00%–4.25%, initially sent EUR/USD higher, but momentum soon reversed. By Friday, the pair slipped back to 1.1800, with sellers pressing toward 1.1780. The inability to sustain above 1.1860 reflects both technical exhaustion and lingering macro headwinds.

Federal Reserve Dovish Shift Meets Inflation Concerns

Markets widely expected the rate cut, but the tone of Chair Jerome Powell’s comments mattered more. While policymakers penciled in two more cuts in 2025, Powell underscored inflation risks, with core PCE at 2.9% year-over-year in July — the highest since February. That hawkish undertone muted euro gains. Futures markets still price in another 50–75 basis points of easing by year-end, but the lack of strong forward guidance limited the euro’s follow-through.

Technical Breakdown Highlights 1.1800 as Make-or-Break Support

EUR/USD broke its ascending trendline late in the week, a signal traders view as a structural shift. Immediate resistance now stands at 1.1867, while a close above that level could re-open the path back to 1.1920 and potentially 1.2000. On the downside, 1.1800 remains pivotal — failure there exposes 1.1730 and then 1.1580 as the next major targets. The pair printed a bearish pin bar on the weekly chart, rejecting levels above 1.1900, leaving momentum firmly tilted to the downside unless bulls reclaim 1.1860–1.1870 quickly.

Dollar Strength Anchored by Rate Expectations and GDP Optimism

The U.S. Dollar Index (DXY) rebounded to 97.28, up 0.31%, after four weeks of declines. Stronger U.S. retail sales at +0.6% in August, versus 0.2% expected, reinforced the dollar’s bid. Treasury yields remain soft, with the 10-year at 4.13% and the 30-year at 4.74%, but investors shifted toward the dollar on expectations of steady U.S. growth. GDP data due this Thursday is forecast to remain firm, with Friday’s core PCE release likely to determine whether the Fed maintains its dovish bias or reconsiders pace.

Euro Faces Cross-Currents from ECB Policy and Global Data

The euro has been unable to extend gains despite relative resilience in European inflation at 3.8% YoY. The ECB has held rates unchanged, but hawkish dissent within the Governing Council signals potential friction. Meanwhile, flash PMIs from Germany and the eurozone this week will test whether economic momentum can stabilize. Without fresh growth catalysts, the euro’s reliance on dollar weakness remains its main driver.

Short-Term Price Action Signals Market Caution

Thursday’s move to 1.1850 lacked conviction, with lower highs forming across intraday charts. Institutions appear cautious ahead of U.S. GDP and PCE prints, with order books showing heavier selling pressure above 1.1860. Bears are eyeing 1.1735 as the logical dip target, with stops building just below that zone. A break could accelerate losses to 1.1580, while bulls would need a sustained daily close above 1.1867 to regain control.

Positioning and Market Sentiment Skewed Toward Downside Risk

Speculative positioning shows euro longs reducing exposure after the Fed’s statement failed to provide aggressive easing signals. The U.S. labor market remains firm, with unemployment claims undershooting forecasts, reinforcing the view that the Fed can cut gradually rather than urgently. With the euro unable to hold above 1.1900, sentiment has shifted toward caution, and smart money appears to be scaling back risk ahead of key U.S. data.

EUR/USD Outlook Hinges on U.S. Data Releases This Week

The coming days bring high-impact releases, including U.S. GDP on Thursday and the core PCE inflation gauge on Friday. If GDP surprises higher and inflation remains sticky, EUR/USD could slide sharply below 1.1800. Conversely, weaker data would reopen upside toward 1.1920. Until then, the technical and macro setup favors the bears, with traders watching 1.1730–1.1800 as the critical near-term battlefield.

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