EUR/USD Price Forecast - Euro To Dollar Climbs to 1.1753 as Dollar Weakens on Shutdown Fears and Fed Easing Bets

EUR/USD Holds 1.1750 as Shutdown Risk and Fed Bets Undermine the Dollar

The EUR/USD pair is trading near 1.1753, its highest levels in four days, after recovering from last week’s low of 1.1660. The rebound has been powered primarily by U.S. dollar weakness, as investors priced in growing political turmoil over the looming government shutdown and higher chances of additional Federal Reserve rate cuts before year-end. Treasury yields have been slipping across maturities, further softening the dollar’s yield advantage and providing fuel for the euro’s advance. The backdrop of tariffs and trade tensions is amplifying uncertainty, creating an environment where the euro is regaining ground despite weaker domestic data.

Federal Reserve Rate Path and Dollar Fragility

On September 17, the Fed cut interest rates by 25 basis points, lowering its policy rate to a median projection of 3.6% for 2025. The updated dot plot implies another 50 bps of easing by year-end, with smaller reductions stretching into 2026 and 2027. Inflation remains sticky at 2.7% headline PCE and 2.9% core, with Powell noting that tariffs are keeping goods prices elevated while services inflation shows early signs of easing. He acknowledged the challenge of balancing a cooling labor market with persistent price pressures, describing risks as “more balanced.” Markets, however, are leaning dovish: CME FedWatch data shows a 90% probability of a rate cut in October and about 70% odds of another in December. This aggressive repricing has dragged the Dollar Index (DXY) down to 97.73, its third consecutive session of losses, and opened the door for EUR/USD to reclaim momentum.

ECB Steady While Eurozone Data Stumbles

The European Central Bank has maintained its wait-and-see stance, keeping rates unchanged while projecting core inflation at 2.4% in 2025, cooling toward 1.9% in 2026 and 1.8% in 2027. President Christine Lagarde stressed policy is in a “good place” and reiterated that decisions will remain data-dependent. Yet Eurozone macro figures have been disappointing. German Retail Sales fell 0.2% in August, following July’s 0.5% decline, while import prices dropped 0.5% month-on-month and -1.5% year-on-year. Confidence indicators are mixed, with Consumer Confidence improving slightly to -14.9, but industrial and services sentiment declining. Without stronger domestic support, the euro’s strength hinges more on dollar weakness than fundamental Eurozone demand.

Trade Tariffs and Political Backdrop Pressuring USD

Fresh trade tensions are compounding dollar weakness. Former President Trump’s proclamation of new tariffs, effective October 14, included a 10% levy on lumber imports and 25% duties on vanities, cabinetry, and upholstered furniture, alongside earlier tariffs on heavy trucks and pharmaceuticals. The measures raise inflation risks while threatening supply chains, reinforcing expectations of Fed easing to cushion growth. The unresolved government funding bill has added political risk: VP JD Vance warned a shutdown was “highly likely,” and that federal job cuts could follow, while data releases such as Friday’s Nonfarm Payrolls may be delayed. Such developments deprive the Fed of key inputs and keep pressure on the greenback.

Market Positioning and Futures Data on EUR/USD

Speculators have started trimming bullish euro bets. CFTC data for the week ending September 23 showed net longs in EUR shrinking to 114.3K contracts, the lowest since July, while institutional net shorts narrowed to 165.8K contracts. Open interest climbed to 859.2K, a two-week high, suggesting cautious positioning as volatility builds. This indicates traders are not fully committed to chasing the euro higher without clearer catalysts, even as the pair trades above key support.

Technical Setup: Resistance at 1.1770 and 1.1820

The technical picture for EUR/USD is improving but fragile. The pair is holding above the 200-EMA at 1.1736 and 50-EMA at 1.1727, both now acting as short-term support. Momentum indicators show mixed signals: RSI at 64 signals strengthening buying pressure, while ADX at 14 reflects a weak underlying trend. A decisive breakout above 1.1760–1.1770 could drive EUR/USD toward 1.1820 and 1.1871, and eventually retest the year-to-date high of 1.1918 seen on September 17. On the downside, support rests at 1.1718 and 1.1683, with deeper levels at 1.1646 and 1.1574. Failure to hold above 1.1730 could drag the pair back into consolidation.

Macro Drivers for the Next Leg

The euro’s trajectory will be shaped by upcoming U.S. and Eurozone data. The flash EMU CPI is expected to show modest growth, while U.S. ISM and ADP reports could sway the Fed’s outlook. However, if the shutdown disrupts data flows, the absence of guidance may paradoxically weaken the dollar further, allowing EUR/USD to extend higher. A durable move above 1.1820 would likely need either a dovish surprise from the Fed, stronger Eurozone inflation, or tangible progress in U.S.–EU trade relations. For now, traders see upside momentum intact, but confidence rests on the fragile foundation of U.S. political dysfunction and rate cut expectations.