EUR/USD Price Forecast: Stronger US Dollar Fuels Renewed Decline Below 1.1100

• EUR/USD slips towards 1.1138 as the US Dollar gains ground against its peers.
• Persistently elevated US core CPI prompts traders to increase bets on a hawkish Fed.
• ECB’s Klass Knot set to succeed President Christine Lagarde.

A 0.2% fall leaves the Euro (EUR) trading near 1.1138 against the US Dollar (USD) in Wednesday’s European session. Weighing on EUR/USD is a stronger US Dollar, supported by concerns that the Federal Reserve (Fed) could embark on an aggressive monetary tightening cycle to curb persistently accelerating inflationary pressures.

At 102.51, the US Dollar Index (DXY) reaches a fresh high of almost four weeks during European trading. The index measures the Greenback against six major currencies.

October’s stronger-than-forecast United States (US) Consumer Price Index (CPI) release has led financial markets to begin pricing in a December interest rate increase of 50 basis points (bps), according to the CME FedWatch tool. The probability nevertheless remains modest, at around 13.5%.

In a note, Deutsche Bank strategists observed that the “monthly core CPI print for October was above consensus at +0.30% (vs. +0.2% expected).” The bank went on to say that “it was the third consecutive month with core CPI at +0.3%, and if you take those three months together, the annualised pace for core CPI is running at +3.75%.” It concluded that “that’s the fastest pace on that measure since April 2024, so it made it increasingly difficult to dismiss this as a blip.”

Turning to the headline figures, the bank also emphasised that “meanwhile, the headline CPI numbers were faster still, with monthly headline CPI at +0.35% (vs. +0.3% expected), with the 3-month annualised pace at +5.72%.”

The expected leadership transition at the European Central Bank (ECB), meanwhile, is likely to leave the Euro highly volatile.

Klaas Knot signals readiness for future crisis action as ECB succession draws attention

In Rabobank’s assessment, Dutch central banker Klaas Knot used an interview with the Financial Times to highlight the Governing Council’s record in tackling crises. Knot, a leading contender to succeed ECB President Christine Lagarde, stressed that “If circumstances require it, we will not hesitate to take action.” Rather than signalling a return to “50bps rate hikes due to geopolitically driven inflation,” analysts say his comments addressed the opposite possibility: a future European crisis “of a different nature.” Against that backdrop, Rabobank notes that Knot “would not rule out developing another, more tailored instrument,” pointing to the possibility of new policy tools if conditions worsen again.

EUR/USD Remains Under Bearish Pressure in Technical Trading

Trading at 1.1138 on the daily chart, EUR/USD retains a mildly bearish bias. The pair remains below recent closing levels and just beneath its 20-day exponential moving average (EMA) of 1.1200, now a nearby obstacle.

At around 41, the 14-day Relative Strength Index (RSI) remains below the neutral threshold of 50. This suggests that selling pressure continues to dominate, although the oversold conditions evident earlier in the month have subsided.

Initial support lies at the recent low of 1.1104, with a breach leaving 1.1000 exposed. A rebound towards the 20-day EMA support area near 1.1200 would offer the first indication of stabilisation. To temper the prevailing bearish bias and allow a wider corrective recovery, the pair would need to sustain trading above that level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)