A move to 1.2000 lacks conviction for now

• EUR/USD deflated to three-day lows, revisiting the 1.1750 zone on Thursday.
• The US Dollar picked up a strong upside impulse, hitting multi-day highs.
• Investors continued to parse the Fed’s rate cut and Powell’s upbeat remarks.

The Euro (EUR) lost further ground on Thursday, pushing EUR/USD down towards three-day lows in the mid-1.1700s and adding to the post-Fed retracement. The daily drop occurred as the US Dollar (USD) regained some composure and rose to multi-day highs as investors remained thinking about what the Federal Reserve’s (Fed) decision to lower interest rates on Wednesday meant.

As expected, the Fed cut the Fed Funds Target Range (FFTR) by 25 basis points to 4.00%–4.25%. This triggered a significant rise in the US Dollar Index (DXY), which went back over 97.00 and beyond, along with higher US yields throughout the curve.

Powell warns people to be careful while the Fed lowers rates

The Fed lowered its interest rates by a quarter point in response to some loss of momentum in the jobs market, while inflation remains a concern after the bank said that it is still “somewhat elevated”.

According to projections, there will be another 50 basis point decrease this year, and lesser drops are planned for 2026 and 2027. The median rate prediction for 2025 was lowered to 3.6%, while the growth forecast was raised slightly to 1.6%. The unemployment rate projection stayed at 4.5%, while inflation forecasts were the same.

Not everyone agreed with the decision; incoming governor Stephen Miran wanted a bigger 50 basis points decrease. However, the Fed stuck to its plan to reduce its balance sheet and repeated its dual mission.

In his usual press conference, Chair Jerome Powell said that employment growth has stalled, consumer spending is slowing down, and inflation is at 2.7% for headline PCE and 2.9% for core. He claimed that tariffs are pushing up prices, although services inflation is still going down. Powell also repeated that risks appear more balanced, adding that the Fed is getting closer to neutral, while there wasn’t much interest in a deeper rate cut.

ECB stays the same; inflation close to the goal

Last week, the European Central Bank (ECB) kept all three key rates the same, continuing with its meeting-by-meeting, data-dependent policy. Officials added that inflation is currently mostly in line with the 2% medium-term objective. They expect core inflation to average 2.4% in 2025, then drop to 1.9% in 2026 and 1.8% in 2027.

Christine Lagarde, the President of the ECB, said the bank is in a “good place” right now, with risks more equally balanced. However, she stressed that upcoming decisions on rates will remain exclusively dependent on incoming data.

Tensions over trade ease, but tariffs remain in place

Trade tensions eased modestly after Washington and Beijing agreed to a 90-day extension of their truce in the past weeks. President Trump put off raising tariffs until November 10, and China didn’t respond. Still, the tariffs are high: US goods coming from China are taxed at 30%, while Chinese goods going to the US are taxed at 10%.

Washington also made a new accord with Brussels. The European Union (EU) agreed to lower tariffs on industrial items from the US and make it easier for American agricultural and seafood exports to get into the EU. In exchange, Washington put a 15% tax on most European goods that came into the US. However, ongoing work on EU laws could potentially lead to the introduction of auto taxes.

Technical forecast for EUR/USD: Bulls still want 1.2000

EUR/USD seems like it’s getting ready to break out after a few sessions of stabilising. The 2025 ceiling of 1.1918 (September 17) is where initial resistance lies, prior to the key 1.2000 round level.

On the other hand, the 100-day Simple Moving Average (SMA) at 1.1561 is expected to offer provisional contention, ahead of the August base at 1.1391 (August 1) and the May trough at 1.1210 (May 29).

Momentum indicators imply that the market is still trending positive, although not very strongly. The Relative Strength Index (RSI) has dropped back to around 57, which means that buyers are still in charge. However, the Average Directional Index (ADX), which is just over 16, shows that the trend is still juiceless.

EUR/USD daily chart

What’s ahead for EUR/USD?

The Euro seems like it will test the upside, but it may need a new spark to break higher. That might happen because of new US data, a stronger policy signal from the Fed, or another turn in global trade talks.