EUR/USD steadies near $1.16 as traders weigh ECB tone and dollar strength

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Euro steadies near $1.16

Highlights

- Euro holds near $1.16 amid mixed sentiment and dollar resilience.

- ECB comments and U.S.–China talks shape near-term direction.

- Key support sits at $1.158, with resistance around $1.166.

Technically, EUR/USD remains constrained by downward pressure after failing to extend gains above 1.18 earlier this month. The pair’s inability to sustain above the 0.618 Fibonacci retracement at 1.177 left it below key short-term averages. The 20-day exponential moving average near 1.1665 now serves as immediate resistance, while the 50-day at 1.1664 reinforces that barrier. On the downside, price action has stabilized near 1.1582, but a break below this zone could invite a test of the 200-day EMA around 1.1381.

EUR/USD price dynamics (Source: TradingView)

Momentum indicators also point to softness. The RSI has slipped to 43, below the neutral 50 threshold, signaling that sellers remain in control. A reversal would require a close above the 1.165–1.167 zone, opening the path toward 1.177 and 1.183. Failure to hold above 1.158 could accelerate losses toward 1.154 and potentially 1.138, where long-term support aligns with historical demand levels.

Policy cues and macro backdrop drive sentiment

Fundamental dynamics remain central to the euro’s outlook. Traders are focused on upcoming ECB commentary as the bank enters its quiet period before the next meeting. Markets are already pricing in a potential 25-basis-point rate cut by mid-2026, keeping expectations for dovish forward guidance intact. Across the Atlantic, the U.S. dollar continues to find support from improving trade sentiment, bolstered by Treasury Secretary Scott Bessent’s planned meeting with Chinese Vice Premier He Lifeng in Malaysia. The discussions aim to ease tensions and avert further tariff escalations.

Additionally, optimism surrounding an imminent end to the U.S. government shutdown has helped stabilize broader risk sentiment. President Trump’s statement that a resolution is “within reach” contributed to modest dollar strength, leaving the euro on the defensive. Meanwhile, weak Eurozone data, including another monthly drop in German producer prices, has done little to inspire confidence in the region’s growth outlook.

Outlook

As covered in prior analyses, the euro remains in a holding pattern shaped by technical resistance and macro uncertainty. The 1.158–1.166 range has become the decisive battleground for short-term direction. A break above resistance could revive bullish momentum toward 1.18, but continued dollar strength and weak European data keep downside risks elevated.

For now, traders are likely to stay cautious until clearer policy signals emerge from both the ECB and the Federal Reserve. The next move in EUR/USD will hinge on how central banks balance inflation risks against slowing growth, with trade negotiations and U.S. political developments adding another layer of complexity.

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