EUR/USD Price Forecast: Euro Battles 1.14–1.18 Range Ahead of Fed

EUR/USD Struggles to Escape Double Top Pressure

The EUR/USD pair has entered a pivotal phase, oscillating between recovery attempts and renewed selling pressure. After carving out a clear double top pattern near 1.18, the euro dropped sharply toward 1.14, where buyers provided temporary support. The bounce carried the pair back above 1.16, but the structure remains fragile, with traders wary that the rebound could be another failed rally forming a “lower high.” The massive bearish candle from late July, triggered by failed U.S.–EU trade talks, continues to cap upside momentum, keeping the focus on resistance around 1.17–1.18.

Technical Barriers Define the Euro’s Next Move

Price action is consolidating just above 1.16, but downside risk remains visible. A break below the 50-day EMA would likely accelerate losses back to 1.14, eroding confidence in bullish positioning. If 1.14 fails, technical targets align with 1.12 and deeper retracements that could reset much of this year’s gains. Conversely, a decisive push through 1.17 would reopen 1.18, a zone that has acted as a brick wall on multiple occasions. The euro’s ability to reclaim and sustain above 1.18 would invalidate the double top and shift sentiment toward retesting the 2023–2024 highs above 1.20.

Fed Policy, Inflation Data, and Dollar Moves Keep EUR/USD in Flux

Macroeconomic catalysts remain at the center of the euro–dollar tug-of-war. Federal Reserve Chairman Jerome Powell emphasized in his February testimony that the Fed is “not in a hurry” to shift policy, but markets continue to price in 2025 rate cuts as inflation moderates. Headline CPI is tracking at 2.9%, with core CPI slipping to 3.1%, easing pressure on the Fed and supporting euro demand. Still, if U.S. inflation surprises to the upside, the dollar could quickly regain momentum, dragging EUR/USD back toward parity scenarios. At the same time, the DXY Index, which fell sharply to 97.85 in August, remains below its 50-day moving average, reinforcing near-term bearish pressure on the dollar and lending support to the euro.

Support and Resistance Clusters on Short-Term Charts

The 4-hour chart highlights EUR/USD sitting inside a critical confluence of support, with a short-term swing low and order block aligning inside a fair value gap near 1.16. This area represents the key “make-or-break” zone for bulls, as repeated failures here would embolden sellers to drive price toward 1.14. Should buyers defend this zone, the first challenge will be reclaiming the 1.1680–1.1700 BOS (break of structure) zone, followed by testing buy-side liquidity above recent highs. If momentum builds, traders will eye liquidity runs toward 1.1760–1.1800, a level where the pair previously stalled.

Eurozone Fiscal Policy and ECB Outlook

Domestic developments in Europe also shape the outlook. The euro has been supported by discussions around increased public spending within the bloc, which may compel the European Central Bank (ECB) to slow its rate-cutting cycle. ECB President Christine Lagarde has emphasized the role of fiscal and structural policies in strengthening productivity and resilience, a stance that supports a firmer euro if implemented effectively. As EUR/USD cleared the 2024 high at 1.1214 earlier this year and advanced to a fresh yearly peak at 1.1242, it pushed RSI back into overbought territory, mirroring the bullish thrust that lifted the pair toward 1.1276. Sustained strength in fiscal positioning could revive this trajectory, with medium-term targets near 1.1390–1.1440 if momentum holds.

Critical Price Zones Into September

At present, the 1.0937 November high remains an important medium-term test, with higher resistance zones at 1.1260–1.1280 and 1.1390–1.1440. On the downside, the 1.0830–1.0880 cluster serves as pivotal support, with a deeper slide potentially exposing 1.0760 and 1.0660–1.0710. Traders are watching closely as the pair oscillates within this tightening range, with volatility expected to rise as the Fed’s September policy meeting approaches.

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