EUR/USD price forecast 2026: Dollar strength keeps euro under pressure

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Euro slips to $1.1625

Highlights

- Euro dips to 1.1625 as dollar strength drives market sentiment.

- Fed expected to deliver a 25 basis point rate cut next week.

- Key support sits near 1.1628 with resistance at 1.1680–1.1730.

Markets widely expect the central bank to cut interest rates by 25 basis points, with traders positioning for potential volatility around the event.

Technical setup points to sustained bearish bias

On the technical front, EUR/USD continues to trade under pressure after breaking below its 20- and 50-period exponential moving averages around 1.1650. The pair has retreated from the 0.382 Fibonacci retracement at 1.1684, which acted as resistance during last week’s rebound. Price is now testing the 0.236 retracement at 1.1628, a key support area that aligns with the base of the recent correction.

EUR/USD price dynamics (Source: TradingView)

A clear break below this level could accelerate losses toward 1.1580 and the October low near 1.1540. Conversely, any recovery will face immediate resistance around 1.1680, followed by 1.1730, where the Fib cluster and moving averages converge. The Relative Strength Index has slipped back to 43 after failing to sustain above 55, signaling weakening bullish momentum and reinforcing the bearish tone.

The descending trendline from September’s high near 1.19 continues to cap rallies, indicating that the broader trend remains in favor of the dollar unless the euro reclaims 1.17 decisively.

Macro drivers reinforce dollar momentum

Fundamentally, the dollar’s renewed strength stems from a combination of improving risk sentiment and better-than-expected developments on the political front. President Trump’s recent comments that a “fair deal” with China is within reach have supported optimism over a resolution to the prolonged trade dispute. Meanwhile, White House officials signaled progress toward ending the federal government shutdown, boosting confidence in the short-term U.S. economic outlook.

On the European side, economic data remains subdued. German producer prices fell for the third consecutive month, underscoring the deflationary pressures weighing on the region. The persistent weakness in industrial activity and subdued inflation expectations continue to limit the euro’s appeal, especially as investors anticipate further divergence between Federal Reserve and European Central Bank policy paths.Looking ahead, the 1.1628 support remains the key technical level to watch. A breakdown below this threshold could extend losses toward 1.1539, where the next significant base lies. Conversely, sustained strength above 1.1680 may trigger a short-term corrective bounce, though broader momentum continues to favor the dollar.

EUR/USD price forecast for 2026

Looking ahead, the key question is whether EUR/USD can reclaim the 1.17 handle. Without a decisive break above that level, the broader bias will likely remain in favor of the dollar. Support at 1.1628 remains critical in the short term, while a breach could expose the 1.1539 area as the next base.

For 2026, forecasts point to continued challenges for the euro unless growth momentum improves meaningfully in the Eurozone. Dollar resilience, supported by policy divergence and stronger U.S. fundamentals, is expected to weigh on the pair. Any sustainable rebound toward 1.18–1.19 will require both stronger European data and signs of policy easing in the U.S. Until then, euro weakness is likely to persist.

As discussed in prior analysis, EUR/USD remains driven more by dollar dynamics than euro resilience. The Fed’s upcoming decision, coupled with ongoing trade negotiations between the U.S. and China, will likely dictate near-term volatility.

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