EUR/USD Price Forecast - Euro Steadies at $1.1650 as Markets Brace for Fed Decision and Powell’s Guidance

EUR/USD Price Forecast — Fed Decision Keeps Euro Trapped Near $1.1650 as Yields and Politics Collide

EUR/USD Holds Range at $1.1638–$1.1660 Amid Fed Anxiety and French Political Tension

The EUR/USD pair trades nearly unchanged around $1.1650, consolidating between $1.1615 and $1.1665 as markets brace for the Federal Reserve’s final rate decision of 2025. The pair briefly bounced from Monday’s low at $1.1616, but momentum remains muted, reflecting caution ahead of Chair Jerome Powell’s remarks and the release of the Fed’s dot plot projections.

The market is pricing a 90% probability of a 25-basis-point rate cut, which would lower the federal funds rate to 3.50%–3.75%, but traders are less focused on the cut itself and more on Powell’s tone. A hawkish cut—lowering rates but signaling limited easing in 2026—could lift the USD, while dovish guidance could push EUR/USD higher toward $1.1730.

On the European side, mixed sentiment persists. The Sentix Investor Confidence Index improved slightly to -6.2, but the modest gain failed to fuel bullish traction. Meanwhile, political instability in France remains a drag on the euro, with investors wary that renewed parliamentary gridlock could delay fiscal reforms and spending programs.

Eurozone Fundamentals vs. U.S. Yield Dominance

Despite softer inflation and a gradual recovery in energy-sensitive sectors, the euro remains under pressure from short-term U.S. Treasury yields, which continue to offer attractive carry. The U.S. 2-year yield held near 4.25%, while the 10-year stabilized at 4.14%, capping euro upside.

In contrast, the Eurozone is showing gradual improvement. Germany’s €52 billion defense spending plan is expected to boost growth in 2026, while lower natural gas prices have eased industrial input costs. However, ECB policymaker Isabel Schnabel’s latest remarks signaled caution—acknowledging upside inflation risks and pushing back against premature rate-cut speculation. Her stance reinforced the market’s belief that the ECB will hold rates steady through mid-2026, widening policy divergence with the Fed if Powell signals an easing bias.

Technical Setup: Resistance at $1.1664 Blocks Bulls

From a technical standpoint, EUR/USD continues to trade inside a rising channel, with price stabilizing near $1.1638. Repeated rejections near $1.1664—the 0.618 Fibonacci retracement from November’s swing—confirm the area as a decisive short-term ceiling. A break above this zone could expose $1.1708, followed by $1.1730, while failure to hold $1.1615 would open downside targets at $1.1591, $1.1550, and $1.1500.

The 50-day and 200-day SMAs both slope upward, signaling medium-term stability, while the 20-EMA near $1.1625 acts as immediate dynamic support. The RSI has turned slightly higher at 47, suggesting modest buying pressure, while the Stochastic oscillator exits oversold territory, implying room for continuation if the Fed delivers a softer stance.

Macro Drivers: Fed Cut Probability at 90%, Powell’s Tone Decisive

The CME FedWatch Tool indicates near certainty of a rate cut, but traders remain split on Powell’s message. A hawkish tone emphasizing “inflation vigilance” would likely strengthen the USD, testing $1.1600 support, while dovish guidance hinting at 2026 easing could drive a euro rally toward $1.1720–$1.1750.

The U.S. ADP Employment and JOLTS Job Openings reports due later today may inject short-term volatility. With Nonfarm Payrolls delayed until next week, these indicators will shape expectations around labor market resilience and the Fed’s longer-term policy path.

Outlook and Bias

The pair remains range-bound and data-dependent. For now, EUR/USD reflects an uneasy equilibrium between U.S. yield dominance and Eurozone resilience. The French political overhang continues to suppress risk appetite, while Fed direction remains the central catalyst.

If Powell confirms a cautious, growth-sensitive approach, the euro could extend toward $1.1730 in the coming days. However, a firm inflationary tone could revive USD strength, dragging EUR/USD back to $1.1550.

Bias: Neutral-to-Bullish | Short-Term Range: $1.1600–$1.1730 | Medium-Term Target: $1.1800 on Dovish Fed Shift

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