EUR/USD Price Forecast - Euro Slides Toward 1.1590 as Dollar Firms Before CPI, ECB Tone Adds Pressure

EUR/USD Trades Near 1.1590 as Dollar Strengthens Before CPI; Euro Faces Pressure from ECB Caution and Trade Tensions

The EUR/USD pair hovered near 1.1590, slipping for the fourth straight session as the U.S. dollar index (DXY) climbed toward 99.00, driven by renewed safe-haven demand ahead of U.S. CPI data and escalating U.S.–China trade friction. The pair has fallen nearly 1.3% from last week’s high of 1.1740, reflecting a stronger dollar tone as traders brace for inflation data expected to steer the Federal Reserve’s path into year-end.

Dollar Strength and Trade Developments Shape Momentum

Reports that Washington plans new export restrictions on software-powered goods to Beijing reignited trade tension and strengthened the dollar. The U.S. Commerce Department’s initiative, seen as retaliation for China’s curbs on rare-earth minerals, has widened the yield gap between U.S. Treasuries and European bonds. The 10-year yield stabilized near 4.62%, maintaining the dollar’s yield advantage and keeping EUR/USD under technical pressure.

At the same time, optimism surrounding next week’s Trump–Xi summit in South Korea offered brief relief, as traders weighed the possibility of “several agreements” on energy and agricultural trade. Yet markets remain cautious that the talks could fail to ease friction, especially given the White House’s plan to tighten export oversight. This cautious tone has been reflected across risk assets, with Wall Street futures modestly higher but volatility elevated.

Eurozone Economic Conditions Remain Fragile

The Eurozone economy continues to lose momentum, with data showing consumer confidence at -14.2, marginally above expectations but consistent with weak household sentiment. A Reuters poll (Oct 15–22) found that 57% of economists expect the European Central Bank (ECB) to maintain its deposit rate at 2% through 2026, with no changes anticipated before 2027. Vice President Luis de Guindos reaffirmed that inflation risks are “balanced” but growth remains subdued.

The market now shifts focus to the ECB’s October 30 policy meeting, where officials are expected to reiterate a data-dependent stance. Traders expect ECB chief economist Philip Lane to highlight slowing credit growth and the need for patience before any policy pivot. The euro’s inability to attract yield-driven inflows underscores its vulnerability against a firm dollar backdrop.

Technical Outlook and Market Positioning for EUR/USD

On the technical front, EUR/USD trades in a clear descending channel on the 4-hour chart. The pair failed to sustain a rebound above 1.1625, where the 50-day EMA (1.1631) and 200-day EMA (1.1668) capped gains. The RSI near 44 points to continued bearish momentum. Immediate support lies at 1.1538, followed by 1.1470, the lower boundary of the current channel. A decisive break below 1.1538 could open the path toward 1.1460, while a close above 1.1650 would shift sentiment and expose 1.1710 resistance.

CFTC data shows that speculative euro longs fell 5% last week, suggesting short-term traders are reducing exposure ahead of key data. The volatility index for EUR/USD options rose to 7.8%, its highest since mid-September, signaling heightened positioning ahead of CPI.

CPI and Fed Outlook Dominate Market Attention

The U.S. CPI report is the main event risk. Consensus forecasts call for a 0.3% monthly rise and a 3.1% annual increase in core inflation. A hotter print could boost expectations for delayed rate cuts, propelling the dollar further and pressuring the euro toward 1.1550–1.1530. Conversely, a softer CPI outcome may trigger short-covering, lifting the pair back above 1.1650 as traders re-price the probability of a December Fed rate cut.

Despite the ongoing U.S. government shutdown, which has delayed several key releases like Nonfarm Payrolls, the market remains confident that the Fed will reduce rates twice before year-end. FedWatch data shows a 97% chance of a 25 bps cut in October, followed by another in December, which could eventually limit the dollar’s upside if CPI supports disinflation.

Correlation with Gold and Broader Risk Sentiment

The recent 4% slide in gold prices to $4,150/oz mirrors the euro’s weakness as both assets are inversely correlated with the dollar. Analysts view the concurrent dip in XAU/USD and EUR/USD as evidence of renewed liquidity rotation into U.S. assets. However, gold’s stabilization today has modestly slowed dollar momentum, preventing a deeper euro decline.

Equity and Yield Dynamics Affecting EUR/USD

In equity markets, the FTSE 100 climbed for a fourth straight session, supported by energy majors BP and Shell, which rose over 3% as oil prices rebounded above $60 per barrel after sanctions on Rosneft and Lukoil. The European rally, however, has done little to aid the euro, as investors focus more on yield differentials than equity performance. Meanwhile, U.S. stock futures remain stable, with the Nasdaq 100 gaining 0.87%, reflecting cautious optimism before CPI.

Verdict on EUR/USD

The outlook for EUR/USD (1.1590) remains bearish with limited downside cushion. Persistent dollar strength, trade-war risk, and the ECB’s cautious tone keep pressure on the pair. A sustained move below 1.1538 could accelerate losses toward 1.1470, while only a close above 1.1650 would suggest a corrective rebound. Short-term traders remain focused on CPI as the decisive catalyst for direction.

Final View: Hold with bearish bias — support at 1.1538–1.1470, resistance at 1.1650–1.1710. Any upside remains limited without clear evidence of Fed dovishness or Eurozone recovery momentum.

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