EUR/USD Price Forecast: Euro Near 1.17–1.18: Can Fed 2026 Rate Cuts Push Euro Above 1.18?

EUR/USD: Fed Cuts vs. ECB Pause Keep Pair Anchored Around 1.17–1.18

Current EUR/USD price action and positioning

EUR/USD is trading in the 1.17–1.18 band, with spot and futures pricing clustered around 1.1740–1.1760, after failing to sustain a break above 1.1800–1.1805. The pair has printed a fresh weekly low near 1.1740, while the US Dollar Index (DXY) holds around 98.2–98.3, capping any aggressive Euro upside but also failing to trigger a clean downside break as buyers defend the 1.17 area. Short term, you have a controlled pullback from the 1.1794 swing high, not a collapse.

Fed minutes, 2025 cuts and 2026 rate-cut expectations

The main macro driver behind EUR/USD is the Fed’s pivot. After three cuts in 2025, the policy band now sits around 3.50%–3.75%, a total of 75 bps of easing this year. Minutes from the December FOMC meeting show a split committee:
Most members accept that more rate reductions are likely in 2026 if inflation keeps grinding lower and labour softening continues, while a minority wants to pause after this year’s cumulative cuts to avoid damaging the job market further. Markets are already pricing at least two additional 25 bps cuts in 2026 – effectively 50 bps+ of extra easing – which mechanically undermines the Dollar’s yield advantage and supports EUR/USD on medium-term horizons. Short term, the Fed’s “wait for more data” language gives the Dollar just enough support for corrective rebounds like the current move off the lows.

ECB stance and Eurozone inflation near target

On the Euro side, the ECB is deliberately boring — and that’s exactly what keeps the downside in EUR/USD limited for now. With Eurozone inflation sitting close to the 2% target, the central bank has no urgency to move at the very start of 2026. The base case is no early-year rate cuts, especially as the Euro area avoids a hard landing and wage growth cools without collapsing.
Country data backs that narrative: Spain’s December CPI rose 0.3% m/m (up from 0.2%) with 2.9% y/y, only a tick below the prior 3.0%. The harmonised index (HICP) also printed 0.3% m/m, while the annual rate eased to 3.0% from 3.2%. That combination – sticky but slowly easing inflation – gives the ECB cover to sit tight and forces the rate-differential story to be driven primarily by further Fed cuts rather than a sudden ECB pivot. For EUR/USD, that means Euro policy is not the problem; the risk comes more from Dollar bounces than from Euro weakness.

US macro data: housing, activity and relative growth vs Eurozone

The latest US data run is not “recession now”; it’s slower but resilient – good enough to keep the Fed cautious, but not strong enough to rebuild a bullish Dollar trend. Housing is holding up:
– The FHFA house price index for October came in at 0.4% m/m, quadruple the 0.1% consensus.
– The S&P/Case-Shiller index posted 1.3% y/y vs 1.1% expected.
– Pending home sales rose 3.3% m/m vs 1.0% forecast and 2.4% prior.
At the same time, business activity remains subdued: the Chicago PMI improved to 43.5 from 36.3, beating 39.5 expectations but still deep in contraction territory (<50).
Net effect: the US data mix justifies the cuts already delivered and supports the idea of additional easing in 2026, especially if labour data – like weekly jobless claims edging towards 220k – confirms a gradual cooling. For EUR/USD, this backdrop argues against a sustained Dollar surge and fits a buy-the-dip profile above 1.17 rather than chasing Dollar strength.

Short-term technicals: intraday channels, EMAs and momentum on EUR/USD

Intraday, EUR/USD is in a corrective down-sloping channel on the short-term charts after peaking around 1.1794–1.1805. On the 60-minute view, price has slipped below the 100-hour moving average, with the 14-period RSI sliding towards oversold territory, signalling a fading downside impulse rather than the start of a trend collapse.
Short-term levels are clear:
– Immediate resistance: the 1.1794–1.1833 zone, where prior supply and intraday moving averages converge.
– First supports: 1.1705 and then 1.1662 on the intraday channel floor.
On the 2-hour setup, the pair has dropped under the fast 50-EMA, but still trades above the rising 200-EMA near 1.1705. That combination is classic correction: near-term momentum cooled, structural damage limited as long as 1.1700–1.1705 holds.

Conflicting short-term signals: broken trend line vs oversold conditions

One of the short-term models shows EUR/USD breaking a prior rising trend line and trading below the 50-period EMA, with momentum indicators flashing fresh negative signals even as they enter oversold territory. That tells you two things:
– First, the micro up-leg from recent lows has ended; the market has shifted into a corrective phase, and aggressive dip-buyers are no longer in full control.
– Second, the oversold readings at these levels increase the probability of a stabilisation bounce off 1.1705–1.1660, rather than a clean straight-line breakdown.
In other words, sellers are in charge of the very short-term tape, but they are working against stretched momentum and deeply watched support zones. That is exactly the type of environment where EUR/USD typically grinds sideways to slightly higher rather than trending sharply lower – unless a new macro shock hits.

Daily structure: rising channel, EMAs and key levels for EUR/USD

On the daily chart, the structure is still constructive. EUR/USD trades around 1.1740–1.1750, holding inside an up-sloping channel that has carried the pair higher from the low-1.04s earlier in the cycle. Price remains above the 20-day EMA at 1.1724, which continues to rise, signalling that pullbacks are being bought on a multi-week horizon.
Momentum has cooled: the daily RSI has backed off from overbought, now sitting in the high-50s to low-60s area on prior readings, consistent with a pause rather than the start of a downtrend.
Key daily levels for EUR/USD are:
– Near-term support: 1.1724 (20-day EMA), then 1.1700–1.1705, and deeper down 1.1570 and 1.1379 as the lower channel and prior reaction lows.
– Upside references: 1.1805 as first resistance, then 1.1920 and 1.2098 as medium-term targets inside the existing bullish corridor.
As long as spot holds above 1.1700 on daily closes, the dominant pattern remains a rising channel with corrective pullbacks, not a reversal.

Dollar index (DXY), rate spreads and risk sentiment

The DXY is hovering around 98.2–98.3, in a short-term rising channel but still down sharply – roughly 9%+ year-to-date – as the Fed’s easing cycle eats into US yield spreads. On intraday charts, the index has reclaimed the 98.13–98.25 Fibonacci pocket and trades above its short-term 50-EMA, with RSI above 55 but below overbought. That profile matches a counter-trend Dollar rebound, not the start of a new secular uptrend.
At the same time, the Dollar retains some safe-haven appeal. In bouts of risk aversion or position-squaring into year-end, flows still rotate into the Greenback, which explains why EUR/USD struggles to hold above 1.1800 despite a dovish Fed path. Net result: the Dollar is strong enough to cap Euro rallies but not strong enough, given 2026 rate-cut pricing, to break EUR/USD decisively below 1.17 without fresh macro shocks.

Cross-checks with other majors: GBP/USD and the broader FX tone

Other majors confirm the story. GBP/USD is trading around 1.3460, still inside its own rising channel despite slipping below the short-term 50-EMA. Structural support sits near 1.3410, where the 200-EMA converges with the channel base. This is the same pattern: cooling momentum inside intact uptrends.
In that context, EUR/USD at 1.17–1.18 is part of a broader theme: the Dollar is trying to bounce from compressed levels, but the medium-term structure across G10 FX still favours currencies backed by central banks that are cutting more slowly than the Fed.

Trading strategy on EUR/USD: bias, targets, and invalidation

Putting the macro and technicals together, EUR/USD is not in a clean directional breakout; it is in a bullish trend with a corrective pullback driven by a short-term Dollar rebound and year-end position squaring. The important point is that the data and the charts line up on the same story:

– The Fed has already cut 75 bps in 2025 and markets are pricing additional easing in 2026, which systematically erodes Dollar carry.
– The ECB is likely to stay on hold into early 2026 with inflation near 2%, preventing the rate-differential from swinging decisively back in the Dollar’s favour.
– Eurozone data (Spanish CPI 2.9% y/y, HICP 3.0%) and US data (house prices, Chicago PMI 43.5, pending home sales 3.3%) point to slower, not collapsing growth – a backdrop where rate spreads, not crisis flows, dominate EUR/USD pricing.
– Technically, EUR/USD holds an uptrend on the daily (above the 20-day EMA 1.1724 and the rising channel), while short-term charts show a correction toward 1.1705–1.1662 with momentum already stretched.

Based on this, the rational stance is:
Bias: EUR/USD is a Buy on dips (bullish) while 1.1700–1.1660 holds.
– Entry zone: Accumulation makes sense between 1.1705 and 1.1660, where intraday support, the 200-EMA on lower timeframes, and the lower edge of the correction align.
– Primary upside target: A retest of 1.1805, then a move toward 1.1920 as the next logical waypoint inside the daily rising channel.
– Extended target: If the Fed delivers the additional cuts the market is pricing and the ECB stays patient, a stretch toward the 1.2050–1.2100 band is realistic on a multi-month horizon.
– Invalidation: A daily close below 1.1570 would break the existing channel structure and downgrade the stance from Buy to at best Hold/neutral, opening risk toward 1.1379.

Bottom line: with EUR/USD holding above 1.17 in an environment of future Fed cuts and an ECB on pause, the data and the charts both justify a bullish, Buy-on-dips view, not a bearish one, as long as the 1.1700–1.1660 support cluster is not decisively broken.

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