EUR/USD Price Forecast: Renewed Downside Emerges Below 1.1100

• Can EUR/USD recover from losses near 1.1166 as the US Dollar gains strength?
• A December Fed interest rate hike looks almost assured following October’s hot US CPI reading.
• The size of next month’s Fed rate increase is now becoming the focus of debate in financial markets.

Selling pressure persists on the Euro (EUR), which remains around 1.1166 against the US Dollar (USD) as European trading opens on Wednesday, retaining Tuesday’s losses.

Weighing on EUR/USD is a stronger US Dollar, supported by concerns that the Federal Reserve (Fed) could deliver an outsized interest rate increase at its December policy meeting. Those concerns followed Tuesday’s release of hot United States (US) Consumer Price Index (CPI) figures for October.

At the time of writing, the US Dollar Index (DXY) is hovering near 102.41, the fresh 12-day high reached on Tuesday. The index measures the Greenback against six major currencies.

With a December Fed hike seen as assured, how large could the move be?

A December rate increase is now viewed as virtually assured by TD Securities, which says the “strong upside surprise in the US CPI makes a December hike all but certain,” and reiterates that “today's data certainly seals a Dec rate hike by the Fed.” Governor Waller’s remarks ahead of the CPI release have brought the possible need for a “catch-up” move into sharper focus. As strategists put it, “after Waller's speech, the debate has now shifted to whether the FOMC will go 25 or 50bps,” while TD Securities says attention will turn to whether the Fed should deliver a “catch-up 50bps rate hike in December, or whether to maintain course with a 25bps rate increase and provide strong guidance toward a potential January follow-through.” Their current preference remains unchanged: “we still favor a 25bp hike with a rising risk of another hike in January.”

EUR/USD Technical Analysis: Can the pair regain its 20-day EMA?

A near-term bearish bias persists on the daily EUR/USD chart, with the pair trading at 1.1167 beneath its 20-day Exponential Moving Average (EMA) of 1.1202. Until this short-term trend indicator is regained, pressure on the pair remains. However, the Relative Strength Index (RSI), at 43 and below its midpoint, points to modest bearish momentum rather than outright oversold conditions.

The first resistance on any recovery lies at the 20-day EMA of 1.1202. A daily close above it would be necessary to relieve immediate selling pressure and allow a more substantial rebound. On the downside, support centres on the 17-month low of 1.1104; a breach would bring the psychological 1.1000 level into view.

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

Could Waller’s larger December hike warning strengthen Dollar bulls?

A notably hawkish message from the Fed’s Waller registered a 9/10 FXS Speechtracker score, substantially exceeding the historical average of 7.3/10 and highlighting a pronounced preference for further tightening. Waller explicitly left room for a half-point December rate increase if core CPI comes in around 0.3% or above, while backing at least a quarter-point rise even if the data improves. This suggests a low threshold for further hikes and a clear intention to raise real interest rates, given that policy has “not been nearly as restrictive” as previously believed. His focus on widespread price pressures, continuing risks from producer and energy costs, and labour conditions that remain solid strengthens the upside risks to US yields. It also lends support to the Dollar through the prospect of diverging monetary policies.

Climbing 3.17 points to 145.50, the FXS Fed Sentiment Index confirmed a marked move further into hawkish territory, in line with the high FXS Speechtracker reading. Its position well above the neutral 100 level suggests markets are likely to assign greater odds to a December rate increase, possibly a larger one, supporting the Dollar against lower-yielding currencies.